Two Elite Money Managers Make Big Show Of Faith In This Struggling Energy Company

Cheniere Energy Inc. (NYSEMKT:LNG) has not generated any substantial revenues yet, as the first cargos of LNG are expected to be delivered in the fourth quarter of this year. Therefore, the intrinsic value of the company is primarily based on faith that Cheniere will become a gas export giant in the years ahead. However, the company has been facing challenges from the low price environment for liquified natural gas. LNG prices are somewhat interrelated with the prices of oil, and are anticipated to remain low for quite some time. The fast-increasing supply of LNG in the U.S and Australia coupled with China’s troubling economy have put downward pressure on LNG prices, which are expected to remain that way for the short-to-medium term. Despite facing these challenges and headwinds, Cheniere has been able to sign multiple long-term delivery contracts, which might explain the reason why the hedge fund industry is quite bullish on the stock. For instance, Cheniere Energy recently announced a freshly-signed deal to deliver up to 24 cargoes to Électricité de France S.A. from the Sabine Pass LNG terminal, from 2017 through 2018. As a result, the company is set to deliver up to 92 cargoes, or roughly 340 million MMBtus, to European and Asian customers through 2018.

Although it might take years until market participants can fully perceive the potential of Cheniere Energy, especially with regards to its earnings, the fact that so many top money managers are invested in the stock might suggest that the LNG company has great potential. Therefore, potential and current investors who consider pouring money into Cheniere Energy should ask themselves if there will be enough demand for LNG in the upcoming years in order to mitigate the current low price environment.

Disclosure: None