Sathya Ganesan on Chesapeake Energy Corporation (CHK) until May 29, 2013

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Analyst Actions
Analyst Actions
Rating:
48
83
97
100% (3 of 3) are convinced
 
 
A $1000 long position taken on May 29, 2012 and closed May 29, 2013 would yield:
$407.38 of gains, or a return of 40.74% over the 11 months this idea was active.
This idea is currently: Open to the public 
Sathya Ganesan recommended buying CHK  
To a target price of 24.8000
This idea expired May 29, 2013

Investment Thesis

  • The average forward price ratio of oil to natural gas for equivalent btu energy

    is 7:1. Historically this number has been < 1.5:1

  • Natural gas prices at historic lows, any rebound of natural gas prices will

    provide significant upside to CHK ( currently unhedged for 2012 & 2013)

Supply and Demand

  • Increased natural gas demand going forward
    • Industrials, Electric Power, Transportation (CNG & LNG vehicles)
  • Natural gas supply glut expected to taper off

Negative investor sentiment

  • Several downgrades of CHK by sell side analysts in April.
  • Credit rating was also downgraded by S&P to BB in April.
  • These downgrades have resulted in CHK being oversold to extreme levels. From a contrarian view, this is a great opportunity to build long positions in

    CHK.

Insider buying

  • Company insiders have been steady buyers from March 2011 – March 2012
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This trade idea is the opinion of its author, and does not necessarily represent TheStreetHub.
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