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Gold/Mining/Energy : Chesapeake Energy CHK
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To: Gabor who wrote (564)9/8/1999 9:13:00 PM
From: Ed Ajootian   of 726
 
Gabor,

You will be pleased to know that I am now the proud owner of some of the common stock of this company.

Not so sure how long I'll hang around though. I believe there is considerable downside risk if we have a warmer-than-normal early winter. There's unquestionably a huge amount of hot money chasing this stock, as merely a commodity price play, and much of those $$$ will leave as soon as the first signs of bad news comes over the transom.

So right now I'm mentally gearing up to hang in there only until the 3Q earnings release and then be ready to jettison at least some of the position, win lose or draw, soon after that time.

I believe there is a good chance that the stock will be over $5 by that date, about a 50% profit from where I've bought in at. This rally will occur in spite of relatively flat sequential quarterly earnings and cash flow from 2Q. What will move the stock is that gas will be back over $3 an mcf by the time they announce 3Q (around Halloween). Gas will be that high because of storage injections being done to prepare for the winter demand. A lot of the short sellers will finally capitulate at that point and cover since the analysts will all rush out positive earnings revisions and opinion upgrades.

Since CHK announces their earnings so early (compared to the O&G microcaps), I could sell on CHK's earnings announcement and still probably have time to get back into some of my favorite O&G babies (such as ESNJ and ROYL), well before they announce their 3Q numbers.
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