Natural Gas
What Is the Gas Industry?
Over millions of years, the remains of plants and animals (such as diatoms) built up in thick layers on the earth’s surface and ocean floors. Over time, these layers were buried under sand, silt, and rock. Pressure and heat changed some of this carbon and hydrogen-rich material into coal, some into oil, and some into natural gas.
Specifically focusing on natural gas (the cleanest fossil fuel), its largest component gas is methane, a compound with one carbon atom and four hydrogen atoms (CH4). Natural gas also contains smaller amounts of natural gas liquids (NGLs) and non-hydrocarbon gasses, such as carbon dioxide and water vapor.
Natural gas systems include wells, gas gathering and processing facilities, storage, as well as transmission and distribution pipelines. These components are all important aspects of getting natural gas out of the ground and to the end user.
Natural gas systems encompass the following industry segments:
- Production: Getting raw natural gas from underground formations.
- Gathering and Processing: This involves stripping out impurities and other hydrocarbons and fluids to produce pipeline grade natural gas that meets specified targets. Pipeline quality natural gas is 95% to 98% methane).
- Transmission: This encompasses delivering natural gas from the wellhead and processing plants to city gate gas stations and/or industrial end users. Transmission occurs through a vast network of high pressure pipelines. Natural gas storage falls within this sector. Natural gas is typically stored in depleted underground reservoirs, aquifers, and salt caverns.
- Distribution: Delivery of natural gas from the major pipelines to the end users.
Why Invest in Gas?
The reason for investing in the natural gas industry is very basic – increasing demand and limited supplies.
In its International Energy Outlook 2021, the U.S. Energy Information Administration (EIA) predicted a nearly 50% increase in global energy use from 2020 to 2050. This is primarily a result of projected economic and population growth in the developing world, particularly in Asia.
Global natural gas demand is forecast to grow by 50% to 5.92 trillion cubic meters by 2050 from 2019 levels, the Gas Exporting Countries Forum said about a year ago in its Global Gas Outlook.
Its forecast for gas demand growth is broadly in line with forecasts from other organizations on an annualized basis. The International Energy Agency (IEA) sees global gas consumption reaching 5.22 trillion cubic meters by 2040. S&P Global Platts Analytics forecast global gas demand at 5.29 trillion cubic meters in the same time frame.
LNG (liquified natural gas) is set for strong growth, as domestic supply in key gas markets will not keep up with demand growth. LNG demand is expected to grow 3.4% a year to 2035, with some 100 million metric tons of additional capacity required to meet both demand growth and decline from existing projects. LNG demand growth will slow, but will still grow by 0.5% from 2035 to 2050, with more than 200 million metric tons of new capacity required by 2050.
All this demand has run smack into a lack of investment in the industry.
Moody’s recently released research in which it found the energy industry will need to increase its capital investments by as much as 54% to avoid a major supply crunch in the coming years. The firm estimated that the $352 billion of industry capital investment during 2021 would need to rise to $542 billion in order to keep pace with new demand.
Moody’s report is consistent with earlier reports by Rystad Energy and Wood MacKenzie estimating the industry has been under-investing since 2015 in the finding and development of new reserves that will be needed to meet rising demand.
How to Invest in Gas
So how can you invest into the natural gas industry and its bullish fundamentals?
Exchange traded funds (ETFs) are one possibility, as is buying a futures contract or investing in natural gas stocks.
There are five natural gas ETFs to choose from currently. Please note that some ETF investments offer exposure to both the oil and gas markets simultaneously.
If you decide to invest in natural gas futures, keep your eyes peeled on Thursdays, when the U.S. Department of Energy releases its weekly natural gas storage report.
Lastly, investors can opt to invest in companies involved in the natural gas market. As with ETFs, many companies that are exploring for or producing natural gas are also focused on oil. It is difficult to find companies that are aimed purely at natural gas.
For help in finding natural gas-related investments, make sure you check out the magnifi.com website.
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The information and data are as of the January 10, 2022 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
Space
A new space age is upon us. For the first time in human history, tech startups and private companies, spearheaded by some of the wealthiest entrepreneurs in the world, are sending humans into space.
The investing opportunities the space industry offers are massive. From space tourism to satellite broadband, mining to national security, in the coming decades an entire space economy will be created.
What is the Space Industry?
The space industry is composed of companies that manufacture components that will go into the Earth’s orbit and beyond, as well as the services associated with space travel. There are three major categories in the space industry: spacecrafts, ground support equipment, and the launch industry.
Spacecrafts are vehicles, manned and unmanned, used in space. These vehicles support a variety of applications, such as exploration, communications, navigation, and transportation. The industry includes satellites, space probes, cargo transporters, rovers, and software.
Ground support refers to the equipment used to service spacecraft. It includes manufacturing of control stations, mobile terminals, VSATs, gateways, and specialized equipment manufacturers.
The launch industry focuses on the process by which spacecraft are launched from our planet into space. It includes equipment, machinery, and launching vehicles, as well as the services that go along with it.
Why Invest in the Space Industry?
The space industry is growing rapidly. Morgan Stanley estimates that the global space industry could generate revenue of more than $1 trillion or more in 2040, up from $350 billion, currently. Bank of America’s forecasts are even more ambitious, estimating a $1.4 trillion-dollar market by 2030.
These impressive growth estimates are a direct result of the changes in the economics of space travel. According to NASA, launch costs that had held steady over the 30 year period between 1970 and 2000 have fallen by a factor of seven. It now costs just $432 to send one pound into low earth orbit in 2020, compared to an estimated $38,734 in the early 1980s.
Costs have plummeted due to the creation of equipment and vehicles that are more reliable, adaptable, and efficient. Many of the rockets that are launched today are reusable and the size of satellites have shrunk dramatically.
The rapid decline in the cost of satellites will soon bring a surge in the number of orbiters collecting data. That data can then be used by businesses for everything from predicting the weather to facilitating insurance claims.
Another potential opportunity is mining in space. NASA recently awarded contracts to four companies to extract tiny amounts of lunar regolith (loose unconsolidated rock and dust) by 2024. This could open up the potential for both moon mining, and asteroid mining, with work already being conducted on NASA’s Psyche Spacecraft to study an asteroid with an estimated mineral value measured in the quadrillions of dollars.
As a result, commercial space ventures are drawing record levels of funding as investors rush to tap into the market. Total venture capital investment in the space industry increased by 95% to $8.7 billion from 2020 to 2021. This increase of investment is an indication that private capital markets understand the potential of the space industry.
How to Invest in the Space Industry
Selecting individual stocks in the space industry can be challenging. That’s because most of the public names offering exposure to the industry have limited exposure as a percentage of future revenue, and those laser-focused on conquering the industry are private. This is why the best solution is gaining exposure to the sector through space-focused ETFs. A simple search on Magnifi indicates numerous ways for investors to access these funds with low fees.
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Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.
The information and data are as of the October 14, 2021 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
Technology
Why should you invest in Technology?
The history of technology is the story of humankind. It covers the expanse of
humanity’s efforts to control its environment for its benefit by creating tools.
Tools/technology are things constructed to aid humans to solve problems and improve their lives.
One of the earliest applications of technology was the invention of the wheel. This basic, simple tool revolutionized the lives of humans, making it easier to go from one place to the other.
Fast forward to today and technology (which is simply applied science) of all sorts has infiltrated every aspect of our lives and is the major force for economic growth.
What Is the Technology Sector?
The technology (tech) sector includes companies involved with the research, development and distribution of technologically-based goods and services. The technology industry today is incredibly broad, covering all sorts of scientific disciplines.
The tech sector is categorized into three major industry groups: software and services, technology hardware and equipment, and semiconductors and semiconductor equipment. These three industry groups are further divided into industries and sub-industries.
Another way investors categorize the tech sector is by determining who the intended user of the product or service being offered is: consumer or a business? Consumer goods could mean anything from mobile devices, wearable technology, household appliances and electronics. While businesses rely heavily on technology to create enterprise software, streamline their systems, host their databases, store their information, etc. Modern businesses could not exist without technology.
Why Invest in Technology?
The world has undergone a technology revolution every 40 to 60 years since the industrial revolution began in 1760, from steam power and railways, to steel and electricity to cars, roads and aviation.
Each of these technological advancements brought sweeping economic change. They spawned new business models and created waves of new entrepreneurs. They also displaced old industries, triggered speculative financial bubbles and sometimes even brought social and political upheaval.
Today, the impact of the information and communications technology revolution is arguably the greatest ever. That has led to one undeniable truth: technology bears a far greater influence on our daily lives and investment portfolios than it ever has.
It’s near impossible to design a well-balanced investment portfolio without including tech stocks, as it is by far the largest sector of the U.S. stock market. But there is no reason to avoid it. There is no sector of the modern American economy that technology does not touch and that does not rely upon the tech sector to improve its quality, productivity, and profitability.
Many tech stocks have higher valuations than companies in other sectors. But for good reason. More than anything else, tech companies are associated with innovation and invention. Investors expect big money to be spent on research and development and they also expect to be rewarded by a steady stream of growth, fueled by a pipeline of innovative new products, services, and features.
Of course, there are risks. The tech sector is highly competitive, so any tech firm is at risk of having its product or service replaced by one from a competitor that is better.
However, tech stocks also promise significantly higher than average growth when compared to other equities.
This has been the prevailing trend for decades now. Throughout much of this century’s historic bull market, tech stocks have been leading the way, with the biggest tech stocks outperforming the S&P 500 index over the past 10 years.
How to Participate in Tech Investing
First, invest in what you like. Technology is an intriguing topic to many people, which makes investing in tech stocks interesting. Successful investing involves detailed research. When you enjoy the topic of your research, you’re more likely to do the legwork required to make educated investing decisions.
Second, keep in mind that the tech sector is massive and broad. It covers a wide range of companies in different stages of development. So there is plenty of room for diversification within the tech sector (you can read our articles on AdTech, Biotech, Fintech, Nanotechnology, or Insurance Technology).
If you’re a novice investor or you simply don’t have the time to do the research it takes to pick stocks individually, you may want to look toward technology-focused index funds, exchange-traded funds (ETFs), and mutual funds. A simple search on Magnifi indicates numerous ways for investors to access tech funds with low fees.
Unlock a World of Investing
with a Magnifi Account
Magnifi is changing the way we shop for investments, with the world’s first semantic search engine for finance that helps users discover, compare and buy investment products such as ETFs, mutual funds and stocks. Open a Magnifi investment account today.
The information and data are as of the October 13, 2021 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
