Dan Schmeidler

The Long Case for Cheniere Energy

Stock is currently approaching $3. It amazes me that an alternative energy stock such as LNG is trading as if it is insolvent. Maybe investors are trading down the stock as a signal that this stock will not survive the credit crises. What amazes me even more is that brokerage and financial stocks are trading up (as the did in the last few days) when we are in the midst of a severe credit crunch or revaluation of credit worth. What can possibly lie in the future earning power of theses financials in comparison to that of a struggling alternative energy company. This kind of irrationality in the markets makes me hold on to my LNG position and even consider a further downward move by LNG as an even greater buying opportunity.

The Long Case for Cheniere Energy

One additional note to keep in mind. Souki Charif, current CEO of LNG, sold nearly 3 million company shares between April 15 and April 23 this year, netting well over $30 million on the sale. This type of insider trading undoubtedly contributes to the extremely negative outlook for the company as well as the depressed stock price. In addition to the awful balance sheet (see cash position, long term debt, negative equity, etc.) recently reported insider trading calls for stronger discipline and extreme caution when approaching this speculative play.

The Long Case for Cheniere Energy

$5 is a great entry point as a speculative play for this kind of stock. The only downside from here on forth is the company's ability to stay solvent. Long term debt maturity is not until 2010 and then again 2016. Any earnings considerations for this company would be exclusively to the upside (see above article). It is difficult to imagine that at the current price ($5) any earnings consideration for this company can be factored into a further downward move. This makes for a great and simplified speculative play: If the company stays solvent for the next year or two, the stock will move higher. This is a great alternative energy play, and a great speculative play, offered at a bargain price. I will buy this stock all the way down to $3.00. Any stock move lower than that, I would assume insolvency, and probably liquidate my position at a loss.