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Revisiting Southwestern Energy, A Diamond In The Rough In 2018 & An Even Better Value Today

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  • I wrote a comprehensive 55-page research report on Southwestern Energy for members of The Contrarian that was published on May 21st, 2018.
  • Since then, the share price of SWN has fallen further, before rebounding by over 42% from its recent lows over the past five trading days.
  • The rally in SWN is just getting started, from my perspective, and investors have a rare opportunity to accumulate trophy assets at bargain basement prices, similar to 2008/2009.

Today was a good day, one of my best days personally since 2009.  The even better news is that I think a historic capital rotation is just getting started.

What happened?

Put simply, the "Have Not" stocks finished September 9th, 2019, leading the "Have" stocks by the widest margin since 2009.

From my perspective, this is the prelude to a much bigger move, as fears of a near-term economic recession are wholly unfounded.

How big is the potential opportunity if this capital rotation occurs in a market where trades are historically crowded?

Enormous is the answer.

Consider these facts.  I have served as the head of a research department,  started a boutique investment firm in February of 2009, and have accumulated one of the most decorated careers of highs and lows over the past 25 years (read my bio for a glimpse), and I was convinced that Southwestern Energy (SWN), was a diamond in the rough, a potential stock of the next decade after apparently bottoming in the spring of 2018.

How convinced was I in this matter?

I wrote a 55-page in-depth research report, and published this for members of The Contrarian, then had this report circulated widely on the buy-side of Wall Street.

Here is a snapshot of that publishing log in The Contrarian from 2018.

Here was a picture I used to market that article, again published in May of 2018.

Ultimately, despite my conviction, I was long-term wrong, at least thus far (bigger picture I think the 2018 price will still be a very good entry point for SWN owners) despite being right for a good portion of 2018 (SWN shares rose from $3.50 at the lows to near $6 at the highs), as Southwestern Energy made new lows, plummeting to close 2018, along with many energy equities, who have been pummeled for much of the last decade.

While the price action of Southwestern Energy was disappointing, the long-term story had not changed.  In actuality, it has improved.

Specifically, they had tripled their reserves from 2010, increased the quality of their reserves, lowered their debt, including via a recent legacy asset sale, and brought down their break-even prices by over 33%, all the while weaker competitors were crippled by lower natural gas prices, yet the market decimated the share price of Southwestern Energy, even as their competitive position was much better than at anytime over the past two decades. 

This miscalculation by Mr. Market, who is wrong from my first hand observations much more than the efficient market academics would like to admit, has allowed enterprising investors and traders to buy SWN for as low as $1.58 just 5 days ago, before the 40% plus rally commenced.

After such a strong rally, and a dismal decade of performance in the rear view mirror, many may say that they want to take a wait and see approach.  That is understandable.

However, it is completely turning a blind eye to a potentially historic opportunity.

This opinion, is coming from someone who has excelled at past turning points, owning a number of 1000% plus gainers from their 2008/2009 lows, including Atlas Pipeline Partners, Crosstex Pipelines, Fifth Third Bankcorp (FITB), First Industrial Real Estate (FR), General Growth Properties, which was one of the best performing equities from its 2008 lows before it was acquired by Brookfield Property Partners (BPY), Macquarie Infrastructure (MIC), Ruths Chris Steakhouse (RUTH), and owning two 1000% gainers from their 2015/2016 lows, Exact Sciences (EXAS), and Teck Resources Limited (TECK), and I think the current market environment is presenting the best opportunities since 2008/2009.  

In closing, I authored a research report to members of The Contrarian last month, where I identified seven potential 1000% gainers, and the kicker is, these are not obscure companies.  In some cases, they are industry leaders.

Thus, if you think it is too late to buy a stock like Southwestern Energy, which I recently published a public article on Seeking Alpha on, titled, "Southwestern Energy: Still A Potential Stock Of The Next Decade" with more private detail for members of my research group, then you need to reconsider that shares tripled in 2016 in the matter of a few months, and that is only the Appetizer to what I think will ultimately be the Main Course.

Wrapping up, I think trades are more crowded today than at any time in the past 25 years that I have actively traded and invested in the markets, personally, and professionally, and I think this is going to be the best opportunity to be contrarian, yet.

For a look at a different research approach, I am offering a 20% discount to membership to "The Contrarian" (past members can also direct message me for a special rate), the lowest price point since the founding members price, where we have a live documented history dating back to late 2015, including an updated valuation and price target list for over 103 targeted companies, including several companies that offer upside appreciation potential that rivals the best opportunities of late 2008/early 2009, in my opinion.

Additionally, I am offering a limited time 50% discount for the first 10 new members (I expect these slots, some of which I view as a stepping stone to "The Contrarian", to fill up fast) to a host of research options, including a lower price point. To get this offer, go here, and enter coupon code "september".

Reach out with any questions via direct message.

Via my research services, or another avenue, please do your due diligence, and take advantage of what I believe is a historic inflection point,


P.S. Resilience, which I have written about, and not getting caught in the herd today (trades are more crowded today than in 1999 or 2007 from my perspective) is paramount for the investment landscape ahead, in my opinion.

Analyst's Disclosure: I am/we are long SWN, MIC, FR, EXAS, TECK.

Every investor's situation is different. Positions can change at any time without warning. Please do your own due diligence and consult with your financial advisor, if you have one, before making any investment decisions. The author is not acting in an investment adviser capacity. The author's opinions expressed herein address only select aspects of potential investment in securities of the companies mentioned and cannot be a substitute for comprehensive investment analysis. The author recommends that potential and existing investors conduct thorough investment research of their own, including detailed review of the companies' SEC filings. Any opinions or estimates constitute the author's best judgment as of the date of publication, and are subject to change without notice.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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