The Chesapeake Nightmare Continues

• Posted by Robert Sinn
• on June 25th, 2012

A small sampling of news which $CHK shareholders have had to deal with over the past couple of months:

April 18th, 2012 – “Chesapeake CEO took out $1.1 billion in unreported loans”

April 26th, 2012 - “SEC begins probe of Chesapeake CEO’s well stakes”

May 11th, 2012 – “Chesapeake may delay asset sales, shares sink”

And if the relentless decline in energy shares and oil prices weren’t enough, today investors were welcomed with yet another Reuters story casting CHK CEO Aubrey McClendon in a not so positive light:

“Chesapeake and rival plotted to suppress land prices”

The interesting part of today’s 8.49% decline in CHK is that the stock is right back to where it was trading when the first of the above stories came out in mid-April:

Click to enlarge

I initially viewed this morning’s negative headlines with a dour eye as it seemed like just more of the same from Chesapeake’s embattled CEO. However, after studying the chart (and noting the potential for a large inverted head & shoulders bottom) and remembering some of Howard Marks’ wisdom:

“The herd applies optimism at the top and pessimism at the bottom. Thus, to benefit, we must be skeptical of the optimism that thrives at the top, and skeptical of the pessimism that prevails at the bottom.

It’s our job as contrarians to catch falling knives, hopefully with care and skill. That’s why the concept of intrinsic value is so important. If we hold a view of value that enables us to buy when everyone else is selling – and if our view turns out to be right – that’s the route to the greatest rewards earned with the least risk.”

I found myself viewing CHK shares in a somewhat more positive light – investors with a contrarian bent may want to put CHK on their radar if they haven’t done so already. One investor of whom you may have heard has already jumped into Chesapeake shares with a 7.6% stake…..

 

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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