Even though there is a global push toward renewable energy generation sources such as wind and solar, experts say natural gas will continue to be an important part of the energy mix for decades.
Global natural gas demand rose 2.5% and production increased by 1.2% last year, according to the Statistical Review of World Energy, a yearly snapshot of the world’s energy landscape published since the 1950s. The latest version was released June 26.
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Although it is a fossil fuel and major contributor to climate change, natural gas burns cleaner than coal and offers the advantage of providing consistent baseload power to electric grids.
That’s important, as global electricity demand is expected to increase along with population and industrial growth, the electrification of different sectors such as transportation, and more energy consumed by data centers supporting the growth of artificial intelligence.
As part of that demand increase, super-chilled natural gas that can be transported by ship, also known as liquefied natural gas (LNG), is playing a growing role in the natural gas market. That’s especially true for the U.S. natural gas market, as America is the biggest exporter of LNG, providing investors with stocks of companies that appear to have strong growth potential.
“The most important trend is the structural rise in domestic natural gas demand from data centers and industrial onshoring, alongside the third wave of U.S. LNG export growth, now unfolding after President Trump lifted the Biden administration’s misguided pause on new LNG export approvals,” says Henry Hoffman, co-portfolio manager of the Catalyst Energy Infrastructure Fund (ticker: MLXIX).
With that in mind, here’s a look at seven top natural gas stocks and funds, with their one-year performance as of the June 26 market close:
| Stock or Fund | 1-Year Return |
| Energy Transfer LP (ET) | 22.3% |
| Williams Cos. Inc. (WMB) | 53.3% |
| Cheniere Energy Inc. (LNG) | 42.7% |
| NextDecade Corp. (NEXT) | 9.2%* |
| Kinder Morgan Inc. (KMI) | 52.2% |
| First Trust Natural Gas ETF (FCG) | -7.8% |
| United States Natural Gas Fund LP (UNG) | -14.5% |
*NEXT is up 13.6% year to date, outpacing its peers.
Energy Transfer LP (ET)
Pipeline companies like Energy Transfer are crucial links between oil and gas fields and refiners. This midstream energy company focuses on transporting, storing and terminaling natural gas, crude oil, natural gas liquids, refined products and liquid natural gas.
Hoffman says his fund prefers midstream companies focused on natural gas infrastructure, such as Energy Transfer. He’s bullish on Energy Transfer’s growth prospects regarding data centers and likes ET’s extensive geographical footprint and proven reliability.
Williams Cos. Inc. (WMB)
Within the U.S., natural gas is often transported by pipeline, and Williams operates one of the largest pipeline networks in the nation. For natural gas investors, Williams offers a similar play as Energy Transfer, and they appear to have a strong future providing for large cloud service companies known as hyperscalers.
“Both are positioned to benefit from the coming surge in U.S. power demand, driven largely by hyperscale data center growth,” Hoffman says. “These firms are directly working with hyperscalers on scalable, redundant and capital-efficient power solutions tied to natural gas infrastructure.”
Williams, he says, has long-term agreements in place and capital discipline, which provide investors with a measure of visibility into the company’s prospects.
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Cheniere Energy Inc. (LNG)
The U.S. is the biggest natural gas-producing country in the world, and it also exports the most LNG. Cheniere Energy — which operates LNG liquefaction and export facilities — is the biggest U.S. LNG exporter.
The company has one of the biggest liquefaction platforms in the world, with facilities in Louisiana and Texas. Hoffman likes the company because of its scale and ability to execute its plans.
The company is also a top pick for Dan Buckley, chief analyst at DayTrading.com, who points to Cheniere’s expanding export capacity. This week, the company announced it had made a final investment decision to go ahead with an expansion at its liquefaction facility near Corpus Christi, Texas.
NextDecade Corp. (NEXT)
Like Cheniere, this company is a play on LNG exports. It is building a natural gas liquefaction facility near Brownsville, Texas.
This week, the company announced a repriced $4.8 billion engineering, procurement and construction deal with Bechtel Energy Inc. for the construction of a major portion of the facility and said it also signed a new $4.3 billion contract with the engineering company for an additional expansion.
Hoffman points out that NextDecade and Cheniere benefit from long-term contracted revenue streams with global buyers that have good credit.
Kinder Morgan Inc. (KMI)
This company runs major natural gas pipeline and storage systems; natural gas gathering systems and processing and treating facilities; natural gas liquids fractionation facilities and transportation systems; and LNG regasification, liquefaction and storage facilities.
The company has said it expects natural gas demand to grow on the back of expanding LNG exports, exports to Mexico and power generation. Buckley points out that the company also transports roughly 40% of the natural gas produced in the U.S.
First Trust Natural Gas ETF (FCG)
Investors who want to hedge risk among different companies while still investing in a general theme can turn to exchange-traded funds, or ETFs. These investing vehicles trade under a single ticker symbol just like a stock, but they contain investments in many different companies.
The First Trust Natural Gas ETF tracks an index made up of companies that make most of their money from the exploration and production of natural gas. Its expense ratio is 0.6%.
As a fund of exploration and production companies, FCG may offer a more aggressive way to play the natural gas market compared with utilities, which are often considered defensive assets because they can hold their value better than many other companies in an economic downturn. This is because people are going to need natural gas and electricity regardless of the state of the economy.
Meanwhile, exploration and production companies are considered cyclical investments because they track the ups and downs of economic cycles. And natural gas prices, like those of other commodities, can be quite volatile (see line graph illustrating cyclical fluctuation in natural gas demand).
United States Natural Gas Fund LP (UNG)
This is a different type of fund. It doesn’t hold a basket of equities under a single ticker symbol. Rather, it tracks natural gas price movements based on benchmark Henry Hub futures.
Henry Hub is a natural gas pipeline network in Louisiana that serves as a distribution hub for major natural gas markets. Prices there are considered the benchmark for the U.S. natural gas market.
Investing in natural gas as a commodity means investors aren’t making bets on production company management teams or other company-specific factors. It’s also much less of a hassle to buy this fund than it is to trade futures contracts, but you should also understand that it isn’t designed to be held for long periods.
UNG doesn’t take delivery of natural gas. Instead, it rolls over futures contracts. Because futures contracts that expire farther out are often more expensive than the one the fund is holding, the fund loses money on that rollover. That doesn’t mean it’s a bad fund; it just means it is designed for expressing views about whether natural gas prices will rise or fall over short periods. You may not want to hold it for longer than one day.
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7 Best Natural Gas Stocks and Funds to Buy originally appeared on usnews.com
Update 06/27/25: This story was previously published at an earlier date and has been updated with new information.
