Tuesday, December 27, 2005

Chesapeake Energy (CHK)

I just bought some CHK. A lot of professionals have been talking about a qualitative change in natural gas economics in 2006, since it is now economically feasible to extract gas from unconventional sources, such as some of the shales which Chesapeake is sitting on. Whether or not they are right, their self-fulfilling prophecy should help a little: the price may go up in the short term as people buy because of their predictions, whether right or wrong, which will set the baseline for further changes higher.

In addition, the weather gazers are predicting another rough hurricane season next year. If it disrupts oil imports and storage in the New Orleans region, as it did this year, that will also help natural gas.

Yet another reason: An electronic soothsayer called StockScouter, available for free on MSN Investing, rates CHK 10/10. I haven't been that impressed by StockScouter in the past, but it's better than nothing, and once again, there may be a self-fulfilling prophecy here.

And yet another reason that I bought: The insiders are buying. Usually, when you look behind the one-word insider "positive" rating by the professionals, it turns out to mean nothing. Eight executives exercised two options each, for a total of $37. (Insider sell warnings are worth even less, unless you do the real research yourself.) In the case of Chesapeake, however, the president and the chairman of the board each bought 4 million dollars worth about a week ago, at slightly above today's price. They may be wrong, but I suspect that they're serious.

In addition, the two more-or-less independent research companies whose opinion I like to see on these things, S&P and Argus, seem to like CHK. (Just to be fair: the VectorVest auto-gadget doesn't like it.)

Are five weak reasons almost as good as one good one?

Monday, December 05, 2005

Sell Building Materials Holding Corp. (BMHC)?

The changing risk/reward relationship of BMHC probably means that it's time to sell. The housing market is slowing down, and after a lag, can be expected to take BMHC down with it. Already, for several weeks now, BMHC has been dropping significantly while the indexes have been rising significantly.

It's sad to part from a friend who has given me roughly a 170% annualized return, which comes out to about 298% total return, but what really bothers me is that at first glance I can't find anything obviously worthwhile to do with the resulting cash.

I dreamed I got 30% IRR in my Maidenform bra.

I wonder how many of you are old enough to understand the headline....

Back to business. I'm thinking of buying Maidenform Brands, MFB. They seem to be near the bottom of their post-IPO nosedive. They have two powerful brands, Maidenform and Lilyette, and one of those brands, Lilyette, as one of the big names in plus-size bras, has demographics behind it as the baby-boomesses hit menopause and gain weight. And don't forget the weight problems of the US population generally.

A few caveats. Maidenform has made some major booboos, including a bankruptcy in the past, if I'm not mistaken, and a few new ones which you can see summarized by Jon Markman at http://moneycentral.msn.com/content/P133928.asp . And I don't like buying stock in a company where I can't get any good public information - MFB hasn't been public long enough. I also don't like having to be in the position of trying to call a bottom.

We'll see.

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