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I study billionaires for a living. To be more specific, I study how these investors generate such huge and consistent profits in the stock markets — year-in and year-out.

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That trend finally has begun to reverse, as the rate of inventory build-up has fallen steadily for almost three months. Whats more, the size of the current natural gas surplus relative to year-ago levels has fallen by 23% since late March.

Three big reasons explain this shift:

• Although the primary use of natural gas is still as fuel for winter heating, more and more electric utilities are switching from coal to the much cleaner gas as fuel for their power plants and the recent heat wave has spiked that rising summertime demand.

• Weve had an early start to the hurricane season think late Junes Tropical Storm Debby which has disrupted some offshore production.

• Some gas producers have finally slowed their output, a reflection of the fact that it makes little sense to keep selling gas at the current price of around $2.87 per million BTUs while the production cost is upward of $4.00 per million BTUs.

Another bullish factor for natural gas stocks  in the longer term is the growing drive to find new uses for it. In particular, the U.S. government is aggressively looking for ways to substitute natural gas for dirtier fuels i.e. coal in power plants and gasoline in cars.

Just last week, the U.S. Department of Energy  (DOE) announced $30 million in new funding for 13 research projects dedicated to finding new ways of harnessing Americas abundant natural gas supplies for cars and trucks.

Texas A&M University received a $3 million grant to develop absorbent materials for smaller, low-pressure natural gas tanks (essential if theyre to fit in todays passenger cars). And the University of Texas received a $4.3 million grant to design a single-piston natural gas compressor that would make at-home auto-refueling stations more practical.

As reported earlier in Money Morning . rising demand from China  and southern Asia expected to increase by 17% over the next five years would also bolster natural gas prices  and prospects for natural gas companies .

Investing in Natural Gas Companies

The easiest way to participate in the resurgence of natural gas is to purchase shares in one of the exchange-traded funds (ETFs) that focus on oil and gas industry companies. The two purest ETF plays for natural gas are:

United States Natural Gas Fund LP (NYSEARCA:UNG), recent price $19.25  — With a market cap of just over $1 billion, this is by far the largest of the natural gas commodity funds. It doesnt invest in natural gas stocks, but uses futures and options to mirror percentage changes in the spot price of natural gas delivered at Henry Hub, LA. The funds shares have fairly closely followed the recent pattern in gas prices, falling from a high of $46.38 last July to $14.25 in April, then recovering to current levels.

First Trust ISE Revere Natural ETF (NYSEARCA:FCG), recent price $15.87  — Smaller than UNG with a market cap of $396 million, FCG tracks an equally weighted equity index of the top 30 public companies deriving most of their revenues from the exploration and production of natural gas. The index is rebalanced quarterly, so FCGs share value doesnt precisely track changes in gas prices and is generally less volatile, having traded in a range from $14.11 to $23.22 over the past year.

For those who prefer a more direct approach to investing in natural gas stocks, two to consider are:

Chesapeake Energy (NYSE:CHK), recent price $18.98  — Among the largest U.S. producers, Oklahoma City-based CHK is one of the purest natural gas stock plays. Its share price has closely tracked gas prices over the past year, falling from $35.75 last July to $13.32 in May. Recently, the controversial activities of CEO Aubrey McClendon  have overshadowed the company itself, but Money Morning  Global Energy Strategist Dr. Kent Moors says that when McClendon goes, CHK will be a great business with a long, bright future making it a solid buy at current prices.

Cheniere Energy (NYSE:LNG), recent price $15.24  — The major growth in demand for natural gas is in Asia, while the U.S. has a huge surplus. The biggest profit opportunity is therefore the exporting of U.S. gas to the Far East, but the infrastructure isnt yet up to the task. Cheniere, however, has plans to remedy that. It already has the permits needed to build the Sabine Pass LNG export terminal in Texas. Just this week Cheniere received loans for $3.4 billion  to fund the project, scheduled for completion by late 2015 or early 2016. As that nears reality, Cheniere should start marching back toward the $40-plus share price it enjoyed in 2007.

Written By Larry D. Spears From Money Morning

We’re in the midst of the greatest investing boom in almost 60 years.  And rest assured – this boom is not about to end anytime soon. You see, the flattening of the world continues to spawn new markets worth  trillions of dollars; new customers that measure in the billions; an  insatiable global demand for basic resources that’s growing  exponentially ; and a technological revolution even in the most distant markets on the planet. And Money Morning is here to help investors profit handsomely on this seismic shift in the global economy. In fact,  we believe this is where the only real fortunes will be made in the  months and years to come.