Seven Stocks for an Impending Apocalypse

"The skying is falling....all life on Earth will soon perish....."

That means that it’s the perfect time to load up on some stocks with high-growth potential.  If the world is ending, you might as well take some risks, right?  While we experienced a little bit of a reprieve after the early week rally, don't be surprised if we see cries of doom a few more times before things are all said and done. 

I’ve picked out seven stocks trading at what I believe to be a steep discount right now. All seven are essentially commodity stocks, many highly cyclical in nature. Many are trading below the book value of their equity and if the apocalypse ends up being slightly delayed, you might be able to wait them out to the next boom and make a nice return. 

1. Mosaic (MOS)

Potash stocks have taken a beating recently as concerns over the global economy have gripped the market. Yet, for the next few years, I think the outlook is still very good for potash and the market seems to be overreacting. Analyst forecasts for FY ’09 range from $11.63 - $15.00 and for FY ’10 range from $13.25 - $16.54.   That essentially gives this stock a forward P/E of about 2. However, analyst projections might be a bit overly optimistic. 

However, we do know that MOS reported $4.67 in earnings (on a DEPS basis) for FY ’08 which gives them a trailing P/E of 7.8. Cash flows per share were $5.71 and free cash flow per share was $4.88. Even if they simply continued that performance for a few years, this might be a steal. 

The balance sheet looks fairly good: working capital of 2.34, quick ratio of 1.43, and debt-to-value of 41%. Plus, as already mentioned, they are raking in considerable cash flows. Book value is $17.2 per share. In their most recent quarter, they had earnings of $2.65 per share and cash flows of $1.26 per share and most of the cash flow lag was due to new accounts receivable. 

I believe the prospects for potash are still fairly bright extending till 2010 at the very least (when more competition will probably come into the market and create tighter margins) and at the current rate of free cash flow production, MOS’s current price should be roughly equal to the book value of their equity in two to three years, which seems like a good bargain. 

This stock traded over $160 as recently as June ’08. While I wouldn’t suggest that I expect this stock to get up that high again, I wouldn’t be surprised if it hit the $60-70 range at the very least sometime in the next few years, which certainly isn’t a bad return if you can get an entry point below $40.

2. Stillwater Mining Company (SWC)

3. North American Palladium (PAL)

Both of these companies are selling at a steep discount. Right now, the main problem for palladium and platinum prices is large-scale demand destruction stemming from the current market environment in the automobile sector. There's also news filtering out suggesting that Nissan, Mazda, and a few other automakers have been working on developing nanotechnologies that could reduce the use PG metals in catalytic converters. This is all bad news for palladium and platinum producers, but perhaps the market has overreacted. Even in the worst-case scenario, prices have to rise at this point because no one is going to be willing to mine for PG metals if they can't turn a profit.

While palladium's future is rather uncertain at the moment, it does have a lot of unique properties that might lead one to believe that its use will eventually be extended to newer products. It’s already used in catalytic converters, dentistry, watch making, surgical instruments, and a handful of other applications. If we ever start using vehicles with fuel cells, it would seem to have some very high growth potential. So while it would be difficult for me to pinpoint what precisely could happen in the next decade, suffice it to say, there are legitimate reasons to believe its usage could eventually grow.   

There are also other trends in the industry that could cause prices to rise significantly in the future. First and foremost, there is the issue of the depletion of the Russian palladium reserves. Its unclear how much Pd Russia has left, but don’t be too surprised if their supply is emptied out in the next five years. Top that off with the fact that Norilsk (home of palladium and nickel mining company Norilsk Nickel) is an environmental disaster.   Then there’s also the South African infrastructure nightmare that is slowing production of PG metals in that nation. Given all this and the fact that in times past, palladium and platinum mining have been highly cyclical industries, this means there might be consider value to be had in players like Stillwater Mining (SWC) and North American Palladium (PAL). 

Taking a look at Stillwater first, the book value of their equity is $5.45 per share. Yet, the stock is trading around $3 to $4. SWC has a working capital ratio of 4.89, which is good. Debt-to-value ratio is 37% --- slightly higher than I like to see, but still fairly solid. All in all, I don't believe they should have any problem paying their bills in the next couple of years.

Onto North American Palladium --- the book value of their equity is $3.49, yet the stock is trading around the $1 – 1.70 range, a very considerable discount. Debt-to-value ratio is very low at 15.2%. Working capital ratio is 5.57 and cash over current liabilities yields a ratio of 1.91. Hence, they appear to be in very sound financial shape and can simply ride it out until things improve. 

Given the steep discounts to book value for both of these stocks, you can basically buy in and wait-it-out for another decade. If demand stays static for another decade (which seems somewhat unlikely to me), one might not lose that much given the value of the equity in their assets. On the other hand, if the price of palladium and/or platinum skyrockets any time within the next decade, causing the price of SWC and PAL to spike up considerably, you just made an enormous return on your investment.

Both these stocks are basically commodities stocks that are highly cyclical. If you want to see proof, just take a look at the chart on. Consider the prices of PAL stock at various points in time over the past decade:

• Jan 1999 = $0.79
• Jan 2000 = 5.16
• Jan 2001 = 9.19
• Dec 2001 = 3.89
• June 2002 = 7.10
• April 2003 = 2.55
• April 2004 = 11.78
• Sep 2005 = 4.88
• April 2006 = 11.95
• Jan 2008 = 3.28
• Mar 2008 = 9.29
• Oct 2008 = 1.10

The idea I’m proposing here is that you can buy in now, sit on your investment for another decade (if necessary) and simply play the waiting game. At some point, there is another spike in demand or reduced supply and the price jumps back up. One could easily triple their return, or even make a 6- to 10-fold profit if one got lucky enough. Even if it takes 10 years for that happen, it’s a worthwhile investment still. This is a long-term investment and both these stocks are highly volatile, however, so I wouldn’t advise jumping in if you want a quick profit or have a low risk tolerance.  

4. Evergreen Solar (ESLR)

Poor beaten-down Evergreen Solar; you almost have to feel sorry for them. While companies like First Solar (FSLR), Energy Conversion Devices (ENER), and even Chinese solar manufacturers like Canadian Solar (CSIQ) shot up during the past few years, Evergreen has been the ignored stepchild of solar. 

Perhaps people are overlooking something --- such as maybe a $3 billion backlog. That’s right, a $3 billion backlog. To put that in perspective, in their most recent quarter, they had revenues of $23 million in their most recent quarter Multiply that by four to get a rough estimate of yearly revenues, and that ends up being about 32 times that number.

Of course, this company looks like it’s underperforming if you look at their income statement. They lost eight cents per share last quarter and broke even the quarter before. Who’d want to buy into a company with no profits, right? Unless of course, that company was simply breaking even due to their currently low manufacturing capacity and they were massively upgrading their capacity and they had a certain technology that gave them an advantage over their competitors and they had a $3 billion backlog and they had an equity interest in a sister company that was doing similar things. That might change things a bit, right? 

Evergreen recently added 80 MW of capacity in a new facility in Devins, MA. Around the end of 2009, they plan to expand this upgrade so that they have 160 additional MW of capacity online. Compare that to their current capacity of 15 MW. They have additional plans for expansion and they hope to expand all the way to 850 MW at some point in the future. Of course, all this would be for naught if they didn’t have the sells, but with their current backlog, that does not seem to be a problem.

Assuming that Evergreen can slightly improve their margins as greater efficiencies are realized, they could earn anywhere from 15 to 20 cents per share each quarter; even if you play it conservatively and estimate they make roughly 60 cents per share for the year; at a P/E of 10, that would justify a price of $6. That’s just after the first upgrade. Potentially, this company could earn profits of a few dollars per share with 3-4 years and right now, it’s only selling for about $4 per share. Of course, if there is excess capacity in the industry for awhile, as Goldman Sachs recently predicted, revenues could decline and put a dent in that, so it’s not a sure bet, but nothing ever is in the market. It is worth mentioning that the U.S. government recently extended and expanded the solar tax credits. Plus, crystalline silicon prices will probably decline over the next few years, which might help ease any margin pressure.  

The good news is that the book value of ESLR’s equity is around $4.2 per share and the stock is actually selling for less than that. They have a working capital ratio of 2.6 and even if we discount their "restricted cash", they have a quick ratio of 1.6. If I go a step further and factor in their slightly negative cash flows from operations, we still end up with a 1.24 ratio. Total debt-to-value is 30%, so they look to be in fairly solid financial shape and at less than book value for a company for huge potential, that doesn’t seem so bad. 

5. Chesapeake Energy (CHK)

Talk about a bad week. Chesapeake CEO Aubrey K. McClendon got a margin call and had to sell off his entire stake in CHK. It couldn’t have come at a worse time given that the stock already looked a bit undervalued. Now, it’s trading in the $17 range, despite a brief jump during the early week rally.

CHK's stock has plummeted even faster than the rest of the market. They were trading at about $70 three months ago and recently dipped below $14. That's a huge drop and only partially explained by the aforementioned margin call. The overall market is still in a panic and downgrading everything down below book values. CHK is particularly susceptible to the current fears because they have a lot of leverage --- a 73% debt to value ratio and 0.44 working capital ratio are very scary. Additionally, CHK has absolutely no cash on its balance sheet.

However, the problem with only using those metrics is that a company can be raking in significant cash flows from operations and Chesapeake seems to be in better shape on that front. One might also consider that natural gas seems to be a very good investment right now, with demand likely on the rise.   Then, there’s also the fact that the book value of CHK’s equity is 18.85, they have very valuable assets, and they are operating profitably; and yet, they are trading at a discount.

Earnings forecasts look good. The consensus is around $3.89 per share for FY '08 and $4.14 for FY '09. Cash flows from operations are strong. I calculated $5.28 per share for the previous quarter. While they were cash flow neutral for that quarter, it was largely due to spending on investments, which is probably a good thing.

Overall, even with all of the negative, I'm looking at this as a lower-risk opportunity than it would normally be. Worst case scenario --- their assets are worth more than what they are trading at. They are raking in cash flows from their operations, have significant earnings potential right now, and appear to be in a very good industry at the right time. 

6. Titanium Metals (TIE)

The first thing to like about Titanium Metals is that they manufacture titanium (as you were probably able to ascertain). The outlook for the metal looks fairly good for the future. 

The second reason to like TIE is that they are profitable, have decent cash flows, and they are selling only slightly above the book value of their equity. 

The third reason to like TIE is that insiders are buying into this thing like there’s no tomorrow.

So we’ve got a company with some potential high-growth in the next few years, selling fairly cheap, and everyone familiar with the operations seems confident enough it to believe the stock could create some good returns.  Admittedly, my knowledge about the titanium is somewhat limited, but that sounds like a good formula. 

7. Zoltek (ZOLT)

Hi, I’m Troy McClure. You might remember me from previous bullish articles on low-cost carbon fiber manufacturer Zoltek, such as “How I Learned to Stop Worrying and Love the ZOLT”. 

In my prior article, I wrote about Zoltek’s strong margins and how I liked their market position. Given the fact that ZOLT has been profitable in recent times, it’s sort of strange to seem now trading around the book value of their equity: $11.07 per share. ZOLT has dipped down below $8 for a short time and seems to have leveled off around $10-11. That’s not a bad price for a company with growth potential as huge as Zoltek. 

There are, to be sure, some risks. For one, while there’s no evidence for vast demand destruction for Zoltek’s products, there does appear to be lowered demand for higher-cost carbon fiber that companies such as Hexcel (HXL) sell to the aircraft industry. The problem with this is that it’s possible that those companies could start dumping their carbon fiber at cheaper prices, somewhat undermining Zoltek’s margins. However, this might be more a short-term problem and I wouldn’t recommend ZOLT to anyone but a long-term investor. The real potential for this company is at least two to three years down the road after capacity upgrades.   It’s not a certain bet, but below the book value of their equity, the risks end up being substantially downgraded and there could be a very big reward at the end. 

The Aftermath

Hopefully, that apocalypse is delayed for at least another decade and you can buy into some stocks to be had at a discount right now. As my last article on historic post-market crash returns suggested, if you buy when the market is at the bottom, you can make a very sizable return if you stay in for the long-term. 

I can’t say for certain that we’ve bottomed out, but there are many companies out there that look very cheap right now one way or another.   Hopefully, my seven suggestions might help you onto the right track or give you a little extra insight into companies you were already looking at. Maybe ten years from now, we’ll all have some pretty decent returns. Or maybe that apocalypse will have come and it won’t even matter.

Disclosure: I am long on PAL, SWC, and ESLR.

Comments

[NOWHEREMAN:]

AAUK can be a proxy for commodities in general.

If the Compressed NG and Electric Cars become fadish, the need for catalytic convertors wiil diminish.

I am long PAL but will abandon it if conditions warrant.

The figures you cite are historical, the new dynamic has yet to be revealed. What may appear to be undervalued now could well be overvalued 6 months from now depending on how severe the currently unfolding crisis gets resolved.

For now Commodities are "dead" money. Instead of MOS, I prefer IPI. My Solar plays are TSL and YGE because they are vertically integrated, are Chinese and the Chinese have a Solar Policy and the wherewithal to pump into them.

2008 Oct 16 05:03 AM

[H.J. Huneycutt:]

The thing on PG metals is that both of these companies are selling for nearly a 70% discount to their equity. Sure, there's more downside, but at the current price levels, how much further can things go? At some point, prices have to go back up because it's not profitable to mine PG metals right now.

Even if demand is dramatically diminished for the next decade, I'm not so sure that these companies aren't worth more than their stock prices right now. Their assets alone should justify the market's current valuation.


TSL and YGE both scare me a bit. Too big of a cash flow lag.

2008 Oct 16 06:53 AM

[CT Programmer:]

Great article! It's really refreshing to see someone ACTUALLY ANALYZE something, giving you both a realistic upside and downside for each stock. As opposed to the many articles on SA either ultra-hyping or ultra-bashing stocks depending on whether they are long or short. Really good analysis. Keep up the good work.

Question: You mention TSL scares you due to the cash flow lay (which of course scares me because I have TSL shares). Can you elaborate a bit?

2008 Oct 16 09:10 AM

[H.J. Huneycutt:]

CT Programmer,

Thank you for the kind words.

TSL has a cash flow lag because they report substantial earnings (on their Income Statement), but their cash flows from operations are substantially negative (on the Statement of Cash Flows). A great deal of this difference comes from increases in inventories and accounts receivables. Then, they've also made significant up-front payments to silicon providers.

From what I've heard, it's common practice in the industry to pay for raw materials up front and to make sells on a receivable basis; however, the sheer size of their lag somewhat frightens me. It might be completely innocous, but as an investor, I have no way of knowing that for certain.

Plus, I am admittedly baffled by a good deal of information in their financial statements. That doesn't necessarily mean there's anything wrong; but if I can't figure out what's going on, that doesn't make me very comfortable.

They might actually be a fairly decent company, but I simply find Evergreen Solar (ESLR) and LDK Solar (LDK) to be somewhat better bets given the knowledge available to me. I'm also slightly positive on Canadian Solar (CSIQ), even though I have more reservations about them.

2008 Oct 16 09:57 AM

[Morocco:]

sorry..dont take stock advise from men in funny hats

2008 Oct 16 10:37 AM

[NOWHEREMAN:]

How about "Pointed Hats with astrological embellishments"?

The return of Wizards and Sorcerers.

2008 Oct 16 11:45 AM

[H.J. Huneycutt:]

Morocco,

Nothing funny about fedoras! Just ask ole' Humphrey Bogart!

2008 Oct 16 11:47 AM

[H.J. Huneycutt:]

Paultaut,

I'm glancing over IPI's financials. Why do you like them over MOS?

I think there might be value to be had in all the potash producers, but just from a shallow glance, IPI's price compared to its fundamentals doesn't seem quite as good to me as MOS. In particular, the book value of their equity is about $7.75 per share and while they do have some good free cash flows, I don't see it paying itself off in basically 2-3 years without a significant increase over the next few years. Which isn't to say it's a bad bet --- just that I'm curious as to argument for IPI over MOS so I can investigate further.

2008 Oct 16 12:02 PM

[User 232593:]

i hope this market doesnt go the way of men's hats.

2008 Oct 16 12:43 PM

[H.J. Huneycutt:]

User,

You don't want the market to drift towards bad styles like baseball caps and look tacky with suits?

2008 Oct 16 01:17 PM

[NOWHEREMAN:]

I like IPI because it is a Pure Potash play unlike POT, and potash as a Fertilizer is independant of Nat. Gas prices.

But a Big part of it is the Future Growth and food requirements of the Emerging market populations, regardless of current conditions, the population of those markets will continue to rise and the amount of food grown using the "old manure in the fields" will not be able to meet that growth. The need for fertilizers in general will grow. I have no qualms about MOS, have liked it since it was in the in the mid-teens a few years back. I saw it as a Backdoor investment in the Cargyle Ag. group which is private. I was in TNH in the low 20's but bailed out when it reached $80, stupid me, that move was unstainable in my eyes, I just couldn't see it doubling from that level. Oh woe, oh woe.

So in IPI, I see exactly what you see, I do not own it yet. And probably won't try to get in until the Forced Liquidations are over. I hope to pick it up in the low teens or with luck below 10. Its still in the Falling Knife Mode.

Initially priced at 32, it opened around 45 and shot up to the mid 70s and is below 20 now. Taking the $30 buck move up and subtracting from $45 gives me a target of $15 but current stupidity might overshoot that downside.

It does not have an Earnings History as a Public Company, not many ANALysts track it (3) but earnings for 2008 are projected at $2.40 and $5 for 2009. That's from 3 Analysts, of which 1 has a strong buy, 1 a moderate sell and 1 a strong sell. In other words the earnings projections are from the Bearish camp.

Meanwhile, MOS has 7 analysts with only 2 in the moderate sell rating. Better earnings projection but they are friendlier.

So I guess what it comes down to is as earnings come in, IPI will attract more analysts who will see the growth story and give buy recommendations Vs MOS which has been around for a while and will have to re-prove themselves to the Street.

Its the New Kid on the block, selling around 3.5 times next years not very optimistic earnings.

2008 Oct 16 02:14 PM

[einstein p ...:]

If MOS is such a good buy, why doesn't CARGILL just buy the rest of the company and take it private?

I've been buying ---- or should I say averaging down --- MOS today at around 30.50 a share. The stock looks very cheap, but that could be said for so many stocks today. You could add NOV to the list.

2008 Oct 16 02:51 PM

[Urbane Gori...:]

Yeah... I held my nose and bought CHK, MOS the day before yesterday ..

Not sure if I'd be looking at palladium miners.... Why not consider something more mainstream like copper (PCU or FCX)... Not only are they down more than the two above, but each pay a healthy dividend, both will ramp up, if we ever see anything like a recovery as not only are they necessary for automotive use, but also any form of construction, and if you are looking at a move to hybrid or electric cars, what is the major component of electric motors .... Not palladium.

Having said that, just because I'm stupid enough to bottom fish, it doesn't mean that anyone else should jump in and buy anything right now. In fact, I expect FCX and PCU to drop some more.... I'll buy then...

jegan ;-)

(Insert picture of me here, lookin' phat in my white Panama)

2008 Oct 16 03:51 PM

[Joyful Alte...:]

Everybody and his brother is touting Mosaic. Just the other day, my shoeshine guy---

2008 Oct 16 06:44 PM

[User 265729:]

H.J. - Great hat... Hope they make a comeback! Emmm... Seems like the last time they were really popular was in the 1930's. I'll be darned!

Here's my picks for stocks -- any companies related to:

1. Firearm manufacture

2. Ammunition

3. Bottled water

4. Ham radios

5. Spam (Hormel will be on the upside here)

6. Soups

7. Buggy manufacturing

8. Pawn shops

9. Booze and drugs

10. Private security and protection firms

2008 Oct 16 07:17 PM

[fatcat:]

Jake,like your interaction,good job...

2008 Oct 16 08:41 PM

[anand:]

I see that you are interested in flash. Can I ask you a question about it here? Or should I ask you on your d-ram article? What do you think about SPSN, and specifically its SFUN acquired flash IP portfolio?

2008 Oct 16 11:24 PM

[anand:]

Nice article. I see my first comment didn't post. Could you and your informed readers please respond to:

seekingalpha.com/artic...

2008 Oct 16 11:26 PM

[NOWHEREMAN:]

Thanks Einstein, couldn't remember how to spell Cargill.

Curbs: There is a publicly traded company called EZpawn, EZPW, Pawn shops.

2008 Oct 16 11:50 PM

[H.J. Huneycutt:]

Paultaut, thanks for that analysis.

John Egan, I haven't looked into copper miners that much. I'll have to investigate further. Btw, I have nothing but respect for anyone who can pull off the white panama! ;-)

curbs-in, thanks for the hat compliment. They *should* make a come back. There's just something about wearing a fedora that gives you that extra little bit of confidence. Though, I believe they were popular up into the '40s and maybe even early '50s. Smaller automobiles and more casual dress patterns seem to have been the cause of the decline. I ride the train to work every day, so it's kind of nice having a hat on cold mornings.

2008 Oct 17 07:07 AM

[H.J. Huneycutt:]

Andand,

SPSN is an odd case at the moment. To be honest, my knowledge of the ins and outs of the memory sector is not all that thorough, so I don't really have much of an opinion on its SFUN acquired flash portfolio. All I really know is their financials are kind of scary right now, which probably explains the fact that their stock has dropped from $2.50 at the time I wrote my article in late July all the way down to $1.20 today. They just reported another huge loss, too, so that doesn't exactly give me confidence about their ability to survive long-term.

At the same time, the book value of the equity in their assets is about $9.70 per share and the stock is selling around $1.20. That's a fairly significant gap. As a business, I question whether they can survive, but as an acquisition target, they would appear to be rather attractive.

It's quite possible someone else could come along, see some value, and offer at least $3 or $4 per share to take them over. I'm not suggesting that this makes SPSN a buy as its mere speculation, but if someone wanted to take a big risk on a short-term investment and hope to cash in, they might be able to. I'm not taking that gamble personally, however.

2008 Oct 17 07:20 AM

[H.J. Huneycutt:]

Andand,

I'm actually hoping to write a fairly thorough analysis of Evergreen Solar sometime soon. As for a short summation of my thoughts on the conference call ---

Their margins dramatically decreased but I think that was to be expected since they haven't reached full capacity at the new Devins facility yet. I have not been expecting to see a significant profit before Q1 of 2009 at the earliest --- and even that might be a quarter a two ahead of schedule.

Their results are going to look distorted for the next two quarters, I believe, which might mean that the price will drop even further. That's fine with me because it gives me opportunity to buy in more --- I've been looking at this as a buy-and-hold until at least 2012.

I've been continually impressed with their management and this conference call gives me even more confidence in them.

It is concerning that they may have more difficulties obtaining financing for future expansion, but I expected as much given the current credit crisis. The fact that they will complete both phases of the Devins facility should at least given them the opportunity to prove themselves to investors and financial institutions. Hopefully, the credit crunch eases up a bit by 2010 and that won't be a huge issue, but that remains to be seen.

The biggest worry to me from the call was the whole deal with Lehman and a potential lawsuit with Barclays. It sounds like they are taking the right course of action, but you don't like to hear stuff like that all the same.

I also worry about oversupply in the market, but it would appear as if they are in a very good position given the way their sales are structured. Plus, the recent expansion of the solar tax credits in the US and the potential for solar incentives in Japan and South Korea are encouraging signs.

2008 Oct 17 07:33 AM

[Smarty_Pants:]

Curbs:

I have already mentioned I am drawing up plans for a buggy whip plant.

I am thinking of an IPO for 100 Million shares at $1 per share.

Once that is complete I will be taking the capital raised and heading off for the Cayman Islands to find the building site for the factory. Everyone knows that the Caymans are know for their buggy whip technology, right?

2008 Oct 17 12:26 PM

[moonbat1775:]

"i hope this market doesnt go the way of men's hats. " User232593

I predict men's hats will come back in style.

1) "V" had a really cool hat.
2) We're going to have global cooling for the next 30 or so years. The head looses quite a bit of heat.
3) The sun gets in my eyes on walks.
4) as someone said, they were popular in the 30's.

I also predict women's hats will make a comeback.

1) because I like them.
2) because they were popular in the 30's


Shell short tattoos and body piercings.

2008 Oct 17 12:57 PM

[moonbat1775:]

Smarty,
Count me in for a few shares. But you can do better than buggy whips, can't you.

2008 Oct 17 12:58 PM

[moonbat1775:]

?

2008 Oct 17 12:58 PM

[Smarty_Pants:]

Once I had the buggy whip market sewn up I was planning on expanding into luxury accessories like fringes for the tops of surreys. (obscure reference to the song from "Oklahoma!")

Fortunately the Cayman Islands are good for any business if you have $100 Million in your pocket.

2008 Oct 17 02:21 PM

[mkreisel:]

PAL and CHK will be wiped out during this credit crunch.

2008 Oct 18 03:43 PM

[Lin:]

curbs-in
Soo funny ! thanks so much for the laugh ! you are correct.

2008 Oct 18 10:08 PM

[Fliujniligui:]

Cheasapeake : If CEO manages his personal life in a way that he gets margin calls and is forced to pressure sell, I am not willing to buy his company which is managed probably the same way : Excessive short term indebtedness without cash reserve to absorb downtorns temporarily and being forced to liquidate at loss and make bad managerial moves.

Period

2008 Oct 18 10:49 PM

[H.J. Huneycutt:]

Mkreisel, PAL doesn't have much debt at all so if they get "wiped out", it's probably because someone buys them out. In which case, I'd wager to say that they could fetch at least $2.50 per share, if not more.

Fliujniligui, that's definitely a valid point. But given their strong cash flows and my own belief that natural gas prices will probably rise in the next year or two, I think it's a worthwhile gamble. Plus, as I mentioned earlier, their net tangible assets are worth over $18 per share, so if they truly had concerns about survival (I don't think they do), it's not as if there wouldn't be a lot of people interested in buying what they do own.

2008 Oct 19 12:27 AM

[MinnesotaKid:]

Love the fedora. And where have the rest of you guys BEEN? Our teenager wears 3 fedoras to school, summer & winter styles, all bought in the past year.

And of course, he wouldn't leave the house without a spray of Z by Zegna cologne! The young people set their own styles now, more than ever...

2008 Oct 19 12:53 PM

[einstein p ...:]

Ditto with CHK. The underlying assets do not begin to reflect the current share price. I would expect them to get bought out or refinanced.

American and Canadian coal and natural gas companies are seriously undervalued. Once the forced liquidations and margin calls end, the fundamentals will kick in and take these stocks higher... much higher.

2008 Oct 19 01:01 PM

[john the ba...:]

so that would imply that nobody will need natural gas to heat their homes and cook food. And that nobody will be driving a car with a cat converter on the tailpipe...


On Oct 18 03:43 PM mkreisel wrote:

> PAL and CHK will be wiped out during this credit crunch.

2008 Nov 15 12:08 PM