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Have the curtains closed on the Liquefied Natural Gas Ltd party?

As the top performing stock from the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) in 2014, shareholders of Liquefied Natural Gas Ltd (ASX: LNG) (“LNGL”) have enjoyed some massive returns over the last 12 months. But the stock’s three-month price chart tells a completely different story.

While the stock is now trading at $2.02, it has risen a meteoric 648% over the last year, yet amazingly, it is down 55% since peaking at $4.49 in September. This can be seen in the chart below.

Liquefied Natural Gas

Source: Google Finance

Plummeting oil prices haven’t done the stock any favours with hedge funds increasingly shorting the stock. In fact, Fairfax Media showed that the number of shorts is now sitting at around 11.9 million, up from 500,000 at the end of September.

An investment in LNGL today could certainly pay off in the long run, especially if its Bear Head LNG and Magnolia LNG projects are successfully constructed and put into operation as the company expects to achieve. However, there is still a high element of risk involved and sceptics are clearly starting to doubt the company’s potential.

While LNGL remains a high-risk / high-reward play, there is a much safer way to play this “unprecedented boom”…

How to play the Australian LNG revolution

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned. You can follow Ryan on Twitter @ASXvalueinvest.

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