Buy 1000 Shares Of Chesapeake Energy (CHK) On 10/22/2014

I bought 1000 shares of CHK at a price of $21.65. The stock pays a dividend of about 1.7% and it has a 52 week low of $16.69 and a high of $29.92. I am getting the stock toward the low end of that range which is something I like, especially in a market that is so volatile. 

Chesapeake Is Starting To Get Their Act Together

One reason Chesapeake Energy is/was trading near its lows is that they have been having trouble with debt which is never a good thing. But several weeks ago they sold off some of their non essential assets for $5.375 billion dollars (you can read about that here) which will go a long way toward reducing that debt. Importantly, investors thought CHK got a good price for those assets and it also shows that the new CEO is serious about tightening costs, lowering debt, and operating in more efficient manner. 

You can read another article here that details more about Chesapeake’s financial situation and what they have been doing recently to better it. If they get an investment grade rating as detailed in that article, it should help to decrease Chesapeake’s cost of borrowing in years to come. 

Investing For The Future

Investing in stocks is almost always about what happens in the future. It is about taking risks that you think are worth taking. If you wait for company XYZ to totally turn things around, it will be too late to buy the stock as the price will have already gone up. You must think ahead and find companies that have good futures ahead of them and ones that are doing the right things to make that happen.

I think Chesapeake is a good example of a company that is turning things around. They are a solid energy exploration and production company that can become a better one with the moves they are making. Additionally, winter is also almost here and is predicted to be a cold one which might help their bottom line. Two last things, insiders have been buying the stock at these low levels and most analysts have a target price around $30 for the stock which would be a nice gain should the stock go up that much. 

I think the upside is greater than the downside for this stock and so I bought it yesterday. 

19 Responses to “Buy 1000 Shares Of Chesapeake Energy (CHK) On 10/22/2014”

  1. vinay says:

    Bruce,

    Do you still think CHK is good buy now..? I am planning to buy some CHK what is your option on it.

    Thank you
    Vinay

  2. Vinit says:

    Hi Bruce,
    With CHK now trading at <12, I believe this is one of the steal buys the market has to offer in Energy sector. Do you expect this to remain choppy until we hit winter and then may be the stock would take off?

  3. Enid says:

    Hi Bruce,

    CHK missed the ER yesterday, which decreases the price significantly. Do you still have faith on the company?

    Thanks,
    Enid

      • Gary Moore says:

        I would recommend you to buy another 1000 share of CHK if it ever dropped down to 13.4 in the next 2 weeks to cover your lost at 21.6. that would even you out to 17.5 a share.

        If it would come back at 21-22 by the end of the year. you are still gaining a lot of margin. The year end earning reported a prediction of 20% growth by the end of year. the total assets lost for 2014 are some bad investments and CHK have been pulling out those for cash.

        Let me know what you think.

        • Bruce Alan says:

          The problem for me is that I already bought more CHK at $19 in another of my portfolios. If I didn’t have those additional shares, I would definitely do what you suggest Gary. I still might, if it goes lower.

          • Gary Moore says:

            I bought 5000 share of CHK at 13.88 on the 10th and planning to buy another 5000 if they ever drop down to less than 10.00 within 6 month. and I set my initial target price at 19.00 for now. I know that summer will be a slow season for them and it might not be able to come back until end of the year. But I would totally invest because I believe the 2nd biggest natural gas company wont fall easy and with a new CEO they will be in good hand. My initial reaction was this stock was way undervalued.

            now the question is that with that much cash on the book would they want to eliminate some of the debts or get more aggressive.

            Thank you for believe in CHK and hold on the stock.

            Gary

  4. Marwan says:

    Hi Bruce,

    Oil price is declining and there is no way for it rise like before $100 a barrel. the question is: is there any way that CHK stock can rise to $27 or above while oil price stays low?

    I just want to know the relation between them.

    Thanks

    • Bruce Alan says:

      Probably not but the price of CHK doesn’t solely depend on the price of oil. Other things like debt management, cash flow, getting an investment grade bond rating, and general health of the company can influence the price going forward. The price of oil is the big thing and will be the most influential to determining how the stock does but oil probably won’t stay this low forever. Buyers with a short term horizon should probably steer clear of this stock but I am sticking with it for now.

  5. Zain says:

    I have been following your blog for sometime, useful tips. I know no one can tell the volatility of most stocks, but what is your opinion on HAL? and COP? I seem to always buy at the wrong time.

    • Bruce Alan says:

      Thanks for reading Zain. I’m sorry but I don’t give opinions of different stocks. I try to stick to one thing: telling my readers what stock(s) I personally buy and why I buy them.

  6. Erik says:

    Hello Bruce,

    The stock is falling down today what do you think about the future of this stock??
    Is this maby a good opportunity to buy extra stocks of CHK??

  7. Dave says:

    Hi Alan ,
    Here Dave again , thank you for your advice on AAPL i’m very happy to own this stock yet : D

    What do you think about the companies affected by the annuncement of the OPEC yesterday that are dropping 9 10 % today ?

    Like you have CHK , i have SLB heavily affected by the drop of the oil price. Should we be worried or maybe it is the right moment to buy more of this undervalued stocks ?

    Thanks for everything ,
    Dave

    • Bruce Alan says:

      Dave,
      I’m not going to buy more but I’m not going to sell either. If I were to buy more it would have to drop further from here. CHK down 12% in one day looks like an overreaction but I could be wrong. It is a long term stock for me that pays a dividend so I’m not going to panic and just hold on.

  8. Marwan says:

    Hi Bruce,

    I have a quick question! did CHK paid you dividends for the third quarter? it was announced today.

    Thanks!

    • Bruce Alan says:

      On Yahoo Finance it says the ex-dividend date was 10/10/2014 for Chesapeake. I bought my shares on 10/22/2014 so I would not be eligible to get a dividend payment this quarter. I see you bought around the same time I did so the same would go for you. Next quarter you will get the dividend though.

  9. Marwan says:

    Good luck Bruce,

    I also bought the same amount for 22$ today, are you welling to sell short or is it for long term?

    Thanks!

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