This U.S. industry is something you might want to invest in in the future!

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Keep reading the article below to know more.

This U.S. industry is something you might want to invest in in the future!

Have you heard about the news that shook the global energy market in May 2024?

According to data, for the first time in nearly two years, Russia overtook the U.S. in natural gas exports to Europe.

This wouldn’t have come as such a shock… if not for the fact that Europe was actually trying to  lower  its intake of Russian gas.

Allow us to explain further…

After Russia’s invasion of Ukraine in February 2022, Russian President Vladimir Putin cut off a major natural gas pipeline to Europe. The latter’s reaction to that was to gradually replace Russian gas with gas from the U.S.

Since then, the U.S. has exported far more natural gas to Europe than Russia has.

In fact, in both 2022 and 2023, the U.S. supplied  nearly half  of Europe’s natural gas imports.

Take note: No other country has supplied more than 14% of that total!

At first glance, you might think Europe has given up on its stance against Russia and just gone back to its cheapest supplier.

However, as we’ll explain in this article, this is really a one-off situation driven by a handful of one-time factors. Despite what data may say, the U.S. natural gas is likely to continue replacing Russian gas in Europe.

The U.S. Natural Gas is Here to Stay

According to  Professor Joel Litman , Chairman and CEO of  Valens Research  and Chief Investment Officer of  Altimetry Financial Research, Russian gas exports to Europe exceeded the U.S. thanks to two compounding factors:

First, Russia sent more natural gas than normal through Turkey in May 2024 because of planned maintenance in June, which shut off all deliveries to Turkey for at least a week.

Second, a major natural gas export facility in the U.S. underwent an outage.

In other words,  May was an outlier.

What’s more?

Natural gas demand in Europe was weak due to the record level of gas storage on the continent and higher temperatures during the spring and summer months of 2024.

These were short-term—if not one-off—events… and as demand in Europe picked up in winter, Russia simply wasn’t able to hold on to its share of Europe’s natural gas supply.

As mentioned, Europe was trying to wean itself off of Russian gas because of rising geopolitical tensions in the region. At the same time, Russia wasn’t able to keep up with the U.S. natural gas market.

According to Professor Litman, the U.S. natural gas production kept rising, with more capacity coming online at the end of 2024.

… and that’s great news for  Cheniere Energy (LNG)!

Cheniere is one of the largest natural gas producers and exporters in the U.S., mainly operating along the Gulf Coast.

The company also plays a critical role in the global energy market, supplying natural gas to more than 35 countries in five continents.

Yet, despite all the macro tailwinds we just mentioned, investors aren’t as bullish on Cheniere…

You can see this through Professor Litman and his team’s Embedded Expectations Analysis (EEA) framework, which tells how well a company has to perform in the future to be worth what the market is paying for it today.

Based on the chart, Cheniere’s Uniform return on assets (ROA) was lower than historical levels in 2021 and 2023, primarily due to low natural gas prices.

After all, prices have jumped around a lot since the pandemic began. In 2021, natural gas demand was low, so prices fell… and Cheniere’s Uniform ROA plummeted.

Then, when Russia invaded Ukraine, prices skyrocketed and Uniform ROA climbed to 14%.

Now that the U.S. is pumping out a lot more supply, prices have fallen back down… but remember: There are several tailwinds in place for the U.S. natural gas market.

Analysts expect Cheniere’s Uniform ROA to reach 15% by 2025. However, the market expects Uniform ROA to fall below 10% by 2028.

Here’s the thing:  The U.S. natural gas outlook is a HUGE boon for Cheniere.

According to Professor Litman, Russia exceeding the U.S. in natural gas exports to Europe is only a  one-time event. The U.S. is likely to take back its spot as the top supplier… soon.

… and as an important player and a strong performer in the U.S. natural gas industry, Cheniere will benefit from this in a BIG way.

That’s why companies like Cheniere might prove to be intriguing buy opportunities for savvy investors like you who are looking to take advantage of the ramp-up in the U.S. natural gas exports.

After all, it wouldn’t be surprising for Cheniere to maintain its 2022 returns… or even increase its profitability moving forward.

Hope you’ve found this week’s insights interesting and helpful.

Stay tuned for next Wednesday’s The Independent Investor!

Since AI took center stage, stocks have soared to all-time highs.

LeLearn more about  this “recipe” for long-term investing  in next week’s article!