My argument favoring the natural gas juniors, as articulated since the inception of this blog, is not so much based on why these stocks will go up, as it is why they are mostly done going down.  To say it shortly, the speculative sponge has been squeezed mostly dry.

Let me explain this in another way.  You don't buy the juniors for their reserves in the ground.  You don't buy them for what they've already found.  You buy the companies on the speculation of what they will find in the future.

The truth is that there are always plenty of very cheap junior companies out there. There are many that have been so since their IPO and that will be through the duration of their ticker symbol for the simple reasons that they do not have anything worth speculating about.  You need a few elephants, or at least a herd of cattles, to get the juices flowing.

But here is the rub.  A junior stock will go up on a big find.  It will go down on the price of the commodity. 

This is the crux of our current situation.  At the moment, because of the beating that these stocks have taken, being tied as they are to a falling commodty, the market is asking you to pay very little for the potential of finding something very big.

Now you might ask, if I admit that I am speculating purely on potential, then why do I keep harping on fundamentals?  Why do I keep trotting out cashflow numbers and P/CF ratios?  

I do this for the simple reason that this is the best judge of the level of speculation that is built into the stocks.  I look at a bunch of companies to make such a determination.  And I do not make a decision on which one to buy based on which has the lowest ratio.  The ratio is simply a measure of the speculative value priced into the stock.  It says nothing about which has the most potential.

It's very different to use fundamentals in this way,  to judge speculation, and then buy those stocks which you deem to be most likely to benefit from a return of the speculative element, then it is to just but the cheapest stock out there.

My experience is that the cheapest stock, in the junior universe, is more likely to stay so than it is not, and more likely to underperform the rest when the tides do turn.

With this all in mind, let's look at the fundamentals.  As I always say, this is by no means meant to be exhaustive, and it is by no means accurate.  Its intent is to paint a picture, and nothing more.

So what are these numbers telling us? 

They tell me that the junior universe, as represented by this admittedly small cross-section, is not pricing in a lot of speculation, even at $6 AECO.

And that tells me that the speculative upside is at its peak.

Again with the caveat (now slightly modified), 'if the weather stays seasonal'.