Gas Drop Fallout

Article Excerpt

Natural gas prices soared to around $16 U.S. per million British thermal units in late 2005, as Hurricane Katrina hurt gas production in the Gulf Coast region of the United States. But supplies improved, and prices fell to their current level of around $6 U.S. The collapse of the Amaranth hedge fund, which made big bets that prices would rise, also helped keep prices down. Lower gas prices have had an effect on two of our favourites: AGRIUM INC. $30 (Toronto symbol AGU; Aggressive Growth Portfolio, Resources sector; SI Rating: Average) needs natural gas to make its fertilizers. Thanks partly to falling gas prices, the stock has gained 20% in 2006, and 70% since we made it our Stock of the Year in 2005. Agrium will probably earn $1.39 U.S. a share in 2006, and the stock trades at 19.0 times that figure. But earnings could reach $1.80 U.S. in 2007, which implies a more reasonable p/e of 14.7. Agrium is a buy. ENCANA CORP…

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