Natty Gas Moving Up
Natural gas is getting a nice bounce today, and that is helping the stocks in that group. I have felt that natural gas has been trading at too steep of a discount relative to crude oil, and that the spread should narrow.
Regardless, one stock I like is Chesapeake Energy (CHK), which is well run and levered to natural gas. The stock is spiking higher today on ok volume, but it is now above its 200-day average.
Moreover, it looks like it has now completed its correction that began back in May. I am looking for this stock to continue to climb into the mid-30s. And although I don't wish for any hurricanes, if we do get one (or more) that would likely serve to drive the stock even higher.
long CHK
posted by J. Kahn @ 11:20 AM
3 comments
3 Comments:
Jordan,
Give me your thoughts on the public offerings that CHK issues to pay for acquisitions and among other things, debt.
To me this is a black eye on an otherwise well run company with sights set on acquisitions. With their gas hedged to the levels they are ($9/mcf) I would think that they'd pay off debt with free cash flow, as well as fund acquisitions. I've been a bull on CHK for a long time, and in the long run, I think they'll post some healthy returns to the investor, but issuing shares will keep the price low.
What are your thoughts on this? I know the market ate up the last issuing, but man, it doesn't look good to issue shares to pay off debt, at least in the eyes of the shareholder.
-Grant
TheCornerOfficeBlog.com
I certainly don't like it when they do that, and I think the stock action tells them the same thing.
Management is heavily invested in their own stock, and I can only hope that they have learned their lesson. I think maybe management was a little unseasoned when it comes to managing the stock.
Unseasoned is right!
What makes this so frustrating is that while Aubrey McClendon offers more shares into the market, he's also BUYING more shares right from the market (millions of shares worth).
Due to this I think there are better natural gas companies to buy stock in, even with CHK as undervalued as it may seem.
Of course, give it a good earnings report and all will be forgotten by most!
-Grant
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