Value investing icon Warren Buffett has been fairly quiet during the coronavirus pandemic, but the Berkshire Hathaway CEO pulled the trigger on a $10 billion deal to purchase the natural gas transmission and storage assets of Dominion Energy. As such, investors may want to keep an eye on natural gas ETFs if the “Oracle of Omaha” is seeing an opportunity in the commodity.
This is the first major purchase of Berkshire Hathaway before the pandemic struck in March. Before the purchase, the holdings company didn’t make any waves in the capital markets—Buffett stated that inaction was the best move at the time.
“We have not done anything because we don’t see anything that attractive to do,” Buffett said via a CNBC report.
Per the report, Buffett suggested that “quick actions taken by the Federal Reserve this year meant companies could get more access to financing in the public markets than they could during the financial crisis in 2008 and 2009.”
“If we really liked what we were seeing, we would do it, and that will happen someday,” Buffett said back in May.
Nat Gas ETFs to Consider
ETF investors looking to play natural prices can look to funds like the United States Natural Gas Fund (NYSEArca: UNG) and the VelocityShares 3x Long Natural Gas ETN (NYSEArca: UGAZ).
UNG seeks to reflect the daily changes in percentage terms of the price of natural gas delivered at the Henry Hub, Louisiana, as measured by the daily changes in the price of a specified short-term futures contract. The fund invests primarily in futures contracts for natural gas that are traded on the NYMEX, ICE Futures Europe and ICE Futures U.S. (together, “ICE Futures”) or other U.S. and foreign exchanges. The Benchmark Futures Contract is the futures contract on natural gas as traded on the New York Mercantile Exchange that is the near month contract to expire, except when the near month contract is within two weeks of expiration.
For traders looking for leverage, UGAZ seeks to replicate, net of expenses, three times the performance of the S&P GSCI Natural Gas Index ER. The index comprises futures contracts on a single commodity and is calculated according to the methodology of the S&P GSCI Index.
A third alternative is the ProShares Ultra Bloomberg Natural Gas (BOIL). BOIL seeks daily investment results, before fees and expenses, that correspond to two times (2x) the daily performance of the Bloomberg Natural Gas SubindexSM.
The fund seeks to meet its investment objectives by investing normally in Natural Gas futures contracts. It may also invest in swaps if the market for a specific futures contract experiences emergencies (e.g., natural disaster, terrorist attack, or an act of God) or disruptions (e.g., a trading halt or a flash crash) or in situations where the Sponsor deems it impractical or inadvisable to buy or sell futures contracts (such as during periods of market volatility or illiquidity).
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