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Activism In Oil Proving Hair Pulling And A Few Other Notes

|Includes: Chesapeake Energy Corporation (CHK), SD, SSE, TLM

It's time to catch up on what's going on in activism. Although the market hasn't been quiet over the past couple weeks, recovering from Thanksgiving is always tough. So here we go:

Firstly, it's been a tough couple weeks for activist investors in oil and gas names. Think: Carl Icahn.

Icahn owns stakes in Chesapeake Energy (NYSE:CHK) -25% over the last three months, Transocean (NYSE:RIG) -48%, Seventy Seven Energy (NYSEMKT:SSE) -72%, Talisman Energy (NYSE:TLM) -53%, and a couple others. The key is to keep a level head, take a step back, read some good commentary (seen below) and then make a decision.

  • CHK - Huge portfolio of great development properties makes it a long term buy even in the face of possible short-term losses (David White)
  • RIG - I should have never gotten into the stock in the first place over a year ago...the dividend is almost so high that it is either due to get reduced, or halted altogether (Abba's Aces)
  • SSE - Seventy Seven Energy made limited progress towards the spin-off from Chesapeake Energy that is a large disappointment for investors (David White)
  • TLM - OPEC not cutting oil production has given investors waiting on the sidelines a great opportunity to buy some E&P names that have been on their radar (Asean Century)

There's also some big losers in SandRidge (NYSE:SD) -52% last 3-months, Apache (NYSE:APA) -37% and Anadarko (NYSE:APC) -29%. In SandRidge is Leon Cooperman, TPG-Axon, Fairfax and other. Apache has Jana Partners as an activist (which we've covered) and Anadarko has the likes of Corvex Management, Third Point and Elliott Associates.

Interestingly enough, Anadarko is one of only three energy stocks on Goldman's list of top 50 hedge fund longs. And although Anadarko is down big of late, it's actually +1% YTD.

(click to enlarge)

As far as good readings re: SD, APA, APC, here you go:

  • SD - The company is trying very hard to promote its turnaround story; however, much of the information it presents to investors and shareholders is framed or presented in ways that are unclear at best and misleading at worst (Donovan Schafer)
  • APA - As Apache shifts its production more toward North America, it should manage to boost cash flow, which means more money for buybacks (of course, yours truly)
  • But also, Investors should avoid buying oil and gas stocks at the moment. As I mentioned above, the price shocks will continue over the next few days due to OPEC's decision, which will result in considerable volatility in the oil and gas stocks (IAEResearch)
  • APC - Even with its so-so financials, Anadarko Petroleum is still a good buy as liquids production growth from the Wattenberg will enable Anadarko to boost its FCF (Callum Turcan)

Secondly, on to the non-oil activist news.

  • Bulldog Investors is getting active on funds. It owns 7% of DWS High Income (NYSE:DHG) and Clough Global Equity (NYSEMKT:GLQ) - Bulldog wants to boost fund performance and ultimately reduce the trading discount.
  • Groveland Capital has nominated six candidates for Biglari Holdings (NYSE:BH) board. Recall that Biglari is the majority owner of Cracker Barrel (NASDAQ:CBRL) - which we've covered here.
  • Riverbed (NASDAQ:RVBD) now has a confidentiality agreement with Elliott to examine a sale/purchase. You know our thoughts re: Elliott, but a good read here, along with various follow-ups,

Despite activist shareholder Elliott Management looking to shake up management, the catalyst for a rebound simply depends on Riverbed closing the large deals (Chris Lau)

  • Corvex Management founder Keith Meister is now on the Williams Companies (NYSE:WMB) board after a year of battling. Corvex owns nearly 10% of WMB. Good read here,

For the mainstream media, this blockbuster deal the largest in the energy patch this year served as yet another reminder of the importance of pipelines and other midstream infrastructure to the shale oil and gas revolution (Elliott Gue)

  • Clinton Group has sent a couple letters and even hired an investment bank to try and save Wet Seal (NASDAQ:WTSL).
  • The group of activists invested in Full House (NYSEMKT:FLL) got a special meeting and a new CEO along with six new directors have been announced - our previous coverage is here.
  • Starboard Value and Oliver Press now own 7.4% of Integrated Silicon Solutions (NASDAQ:ISSI), nominating five board candidates. Our own thoughts re: ISSI to come in a later article.