Should You Buy Liquefied Natural Gas Limited At This Share Price?

What happened to the LNG share price?

Liquefied Natural Gas Limited [ASX:LNG] is a hyper growth small cap stock in many investors’ minds. Its explosive gain in the second half of 2012 saw many becoming substantially richer over a very short period of time. Anybody who followed the herd after that point should have been quite disappointed, because the explosive gain did not repeat itself again.

Before 2012, the stock wasn’t moving much. It was off the radar for many investors. The question is: how do you indentify ‘explosive’ stocks like LNG?

The point is you don’t have to

I am the emerging market analyst at Port Philip Publishing. I recommend emerging market stocks that have a long term value potential. My approach is very different from small cap or micro cap investors.

I don’t ever ask the question of how to identify stocks that will have explosive payoffs. I believe investors don’t have to do that to profit from stock investing.

My approach to LNG is a long/short strategy that involves the use of derivative products. When I compare the risk-adjusted returns of a long-only investors and a long/short investor (after deducting transaction costs), I find that a long-short strategy achieves a greater risk-adjusted return.

What should you do with LNG shares now?

The simple risk-adjusted return (Sharpe Ratio) for a long only investor is 52.8%. The Sharpe Ratio for a well hedged long/short strategy can get to around 85%. This shows a clear outperformance for long/short strategies in LNG’s case.

There are many ways to make money in the market. LNG will continue to be a profitable investment in the future.

If you prefer the ‘explosive’ style of micro and small cap investors, Port Philip Publishing is the place to go because we have both offerings.

You may have more of a ‘quant’ approach though, well in that case you should also give us a call, because we offer a great service called Quant Trader.

One thing is for sure, ‘don’t fly blind’. A competent advisory service like Port Philip Publishing will greatly enhance your portfolio return.

Go ahead and make that call today, have a chat with us.

Ken Wangdong
Emerging Market Analyst, New Frontier Investor

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