I’ve nibbled on a bit of ROSE today.

Basic reasons:

1. Natural Gas prices are down to 2002 levels (always Bullish when prices are at 5 year+ lows).

2. Capital in the natural industry is still tight, which favors potential survivors, like ROSE, in the next upturn, and there always is a new boom in natural gas. The industry is entirely cyclical.

3. Last week, ROSE announced a major credit agreement, which eliminates any questions regarding their survival and ability to expand during the downturn.

4. Some time ago, ROSE announced a settlement with Calpine on their long-standing legal battle. ROSE is now completely litigation free and able to grow as a standalone company.

5. ROSE bought its assets from Calpine for over $1 billion back in July 2005, implying that the current valuation for ROSE is quite reasonable.

6. ROSE is in an industry which has little government interference on a large scale. To invest in the current environment, I think it’s best to avoid the government scams, of which there are now plenty, simply because there is no rational way to evaluate these government-backed companies and their earnings potential. Depressed commodity-type plays, seem to be safe from government meddling and therefore have some appeal for rational investors.

As always, I have no idea where ROSE stock will go in the near-term, but if natural gas rebounds in any meaningful way, ROSE will provide 100%+ returns. If natural gas remains depressed, it’s likely ROSE will go nowhere. So you have what to me seems like an incredible risk/reward, if you can hold the stock for some time.