Why Shares in Venture Global Crashed This Week (And Why it Could Be a Great Buying Opportunity)

Shares in liquified natural gas (LNG) producer and exporter Venture Global (NYSE: VG) slumped by 16.6% in the week to Friday morning. The move comes as speculative money has been exiting the stock following U.S. administration comments suggesting a relatively quick resolution to the Gulf conflict.

Why investors have been buying LNG-related stocks

The Strait of Hormuz, along the coast of Iran, remains closed to almost all commercial traffic in response to attacks on Iran, and given that 20% of the world's LNG flowed through the Strait prior to the war, it's understandable if investors are keen to price in a premium for U.S. LNG producers. Like Venture Global.

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For reference, the company operates two export facilities in Louisiana and plans to bring a third online in 2027. Moreover, the company plans to sign more LNG export deals and is seeking faster permitting to add LNG production capacity, according to S&P Global Market Intelligence.

All of which has made it a stock to buy as long as the Strait remains closed. As such, if market sentiment shifts toward the view that a swift resolution to the conflict is likely, investors will start selling the stock.

Why the stock can recover

But sentiment is one thing, and reality is another. The conflict is ongoing, the Strait remains almost completely closed, and it's far from clear what kind of infrastructural damage will be done to LNG assets in the region when, and if, the dust settles. In other words, the sale may turn out to be premature, particularly if energy prices remain higher for longer, or even if there's a change in the perception of the risk of signing long-term LNG contracts from the Gulf rather than the U.S. That would favor Venture Global over the long term.

Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.