E My Top 2016 Stock Pick

Many things had to come together to help me pick my favorite stock for 2016. First we have a rolling disaster in US energy businesses. Fracking companies face the new year without more hedges against lower prices for oil and gas. Existing contracts run out then. Oil and gas price declines continue.

The rout has moved from the shale fields to gas pipeline utilities businesses, many of which have spun off LPs to create high-yield entities in a market without many alternatives. These are now roiled by the problems of outfits like Kinder Morgan (KMI), NGLS, and Williams (WMB). These utilities were touted by brokers as a way to collect a toll for shipping gas, regardless of its price. But now they are in trouble.

Meanwhile Keystone XL has been derailed—literally leaving it to trains to dangerously transport Canadian oil to markets.

The other component of my selection is the Paris COP 21 accord on global warming. I have been covering United Nations confabs on global warming since the first one, in 1992 in Rio de Janeiro. And this is the first one with a clear program for countries to cut back, to me the equivalent of a Santa Claus rally (which we are unlikely to get in 2015.)

While there are greener energy sources beyond the horizon, right now greater use of natural gas is how greenhouse gas emissions are curbed. In fact, the US has become the only nation to significantly meet climate targets thanks to switching more power plants to natural gas from hydraulic fracturing (fracking) and sideways drilling, mostly because it saves money by producing gas more cheaply. This and not government decrees have cut down on US carbon emissions.

Natural gas is shovel ready, unlike crude oil, which it is illegal to export from the USA; unlike US ethanol which uses more carbon to produce than addition to gasoline saves (as well as boosting the price of food); unlike electric cars and solar roofs, still mostly years away. And there are important geopolitical gains for the US to export its natural gas.

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Disclosure: None.

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