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---------------------- Forwarded by Chris Germany/HOU/ECT on 03/06/2001 04:12
PM --------------------------- From: Jim Homco 02/26/2001 10:42 AM To: jems5@ix.netcom.com, Chris Germany/HOU/ECT@ECT cc: Subject: Gas Stocks Article about CHK - company is very similar to TMR - I'm in both heavily.... Chesapeake Energy stock being sorely undervalued 2001-02-25 By Melissa Davis Business Writer Ask the experts. Chesapeake Energy is more than a $9 stock. Forget that Chesapeake is up more than 200 percent from a year ago -- and up more than 1,000 percent from its lowest days, not long ago, when it traded for less than $1. Chesapeake still appears sorely undervalued. Last week, Chesapeake announced record fourth-quarter earnings that were 1,736 percent higher than earnings for the same quarter in 1999. The company also reported a 2000 net income of $3.52 a share -- which means you can buy Chesapeake for a price that is less than three times the company's earnings. "No stock trades for three times earnings," said Mickey Thompson, executive vice president of the Oklahoma Independent Petroleum Association. "The independent producers are all undervalued right now. Chesapeake is just the most undervalued." Chesapeake is the 10th-largest independent producer of natural gas in the country. And natural gas, because of low supply and high demand, is one of the hottest commodities on the market. It's a huge money maker. So Chesapeake is in the right business at the right time -- and it's into it heavily. Natural gas accounts for almost 90 percent of all the business that Chesapeake does. This has already caught the attention of some prominent investment experts. Chuck Clough has picked Chesapeake as one of his favorite companies in his current favorite sector -- natural gas. And Clough isn't just anybody. Until a year ago, he was chief investment strategist for Merrill Lynch. Shortly after he left, he established a hedge fund that returned 17 percent, after fees and costs, during an 11-month time period when the rest of the market slid -- and the Nasdaq tumbled 44 percent. Clough's young hedge fund now boasts $150 million in assets. He's not too worried about falling natural gas prices. He's invested 32 percent of his portfolio in energy stocks and most of that in natural gas. He's convinced that companies like Chesapeake will begin trading for much more than two or three times their earnings -- and soon. Stephen Smith, a Houston analyst for Dain Rauscher Wessels, considers Chesapeake to be a top performer among the energy companies he covers. He is convinced the stock is undervalued and that -- even after gaining 326 percent last year -- Chesapeake will have another banner year in 2001. "Natural gas prices don't have to stay at $7, $8, $9 or $10 for them to have a good year," Smith said. "The prices could drop to $4 or $5, and that would still be a wonderful doubling of what they used to be. If we can continue to see $4 gas prices, then I think that energy stocks -- and particularly Chesapeake -- will start to respond a bit more." Thompson, who moves within local energy circles, is very optimistic. "The natural gas prices we lived with for most of the '90s will never come back," he said. "I can see a scenario with $4 and $5 gas prices for a long, long time."
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