Yesterday, Chesapeake Energy (NASDAQ:CHK) filed a Form 4 showing that Archie Dunham, Chairman of the board emeritus bought 500K shares of stock ranging in price from $5.22 to $5.26.
Here is a clip of the form 4 for review.
Who is Archie Dunham? Well, he was the CEO of Conoco Phillips (COP) at one time. Here is a clip of his experience.
Archie is bullish on Chesapeake Energy, does he know something about the company that others don't yet realize? I believe he thinks the company is undervalued, and so do I.
Oil under $50 will it last?
I have my own ideas on this subject, it is my belief that the negativity around oil overproduction will soon turn into a booming demand story. I see the markets turning to an imbalance sooner than the market currently believes. I see oil trading back above $55 in 30 days.
Will the CEO step up with a large insider buy? Robert Lawler in my view needs to step up with a large buy signaling to the market the true direction of Chesapeake Energy going forward.
Just two days ago I called on Mr. Lawler to make a large buy, two days later Archie buys $2.5M worth of stock, now it's the CEO's turn.
Is CHK in capitulation?
Here is a look at the charts.
With the quick sell-off in oil Chesapeake has seen its share price to a level that has shown support in the past crisis period. I wrote an article a couple days ago stating I would back up the truck at $4.74. Important note: this was right before the 8% price collapse.
Yesterday the stock hit $4.88 and found support, I believe the stock is in the buy zone and as I have previously stated, at this price it is a takeout target.
Can it go lower? Yes, anything is possible but the charts tell the story along with world events and I like the set up. One can use options to help protect the downside if they so choose.
Right or wrong, I see Chesapeake's 600K to 700K boe production as a prime candidate for a larger deep pocket player to scoop up great assets at what I see as a bargain. A company like Total Sa (TOT) could buy Chesapeake, restructure the debt with stock and cash, immediately changing the cash flow picture, turning the company profitable ahead of the current schedule.
Investors that are bullish on oil going forward may want to take a position at this level.
President Trump's business friendly administration is a major positive for the markets. Today Jamie Dimon said that Trumps agenda has unleashed the animal spirits into the stock market, I totally agree.
Chesapeake has work to do.
CEO Robert Lawler has his work cut out for him, so far he has been up to the challenge and recently stated that he believes Chesapeake is in the best position ever. The market does not believe this yet and with oil under $50 it is understandable.
Chesapeake Energy needs another large asset sale to lower their debt level and increase cash flow, I believe the next sale will mark the turning point in the life of this stock as it regains its upward momentum.
Conclusion
Chesapeake Energy insider Archie Dunham bought 500k shares of stock between $5.22 and $5.26. I wrote the article to update readers as I promised I would. I am calling on CEO Robert Lawler to once again make a large open market purchase if he feels the shares are worth near double where it currently trades.
The stock is at a crucial level, it needs to hold the $4.74 level where I believe there is a significant level of support. It is my belief that oil under $50 will last less than one month as we near the peak driving season with more people working than ever.
As always do your homework and know your exit point before making any trade.
