Fracking stocks fell hard for the second-straight day after hedge fund titan David Einhorn slammed the group for spending too much money and not making enough profits.
But according to Dennis Gartman of "The Gartman Letter," who is sometimes referred to as the "commodities king," one part of Einhorn's interpretation is "terribly, terribly wrong."
Einhorn's case centers around the ways that fracking companies spend, generate and return capital. According to Einhorn, the "large oil frackers have spent $80 billion more than they've received from selling oil" since 2006.
That discrepancy, said Einhorn, makes investing in oil frackers, specifically his main target, Pioneer Natural Resources, a bad bet. Worse still, he said, is the fact that even when oil was trading at $100 per barrel, about 40 percent higher than current levels, the companies still weren't making money.
"As oil prices rose, it seemed like the frackers should have been drowning in cash. But none of them generated excess cash flow. Not even when oil was at $100 a barrel. In fact the opposite was true," he said.
According to Einhorn, the companies responded to higher oil prices by spending more, thus burning even more cash.
Einhorn went on to say that oil prices are expected to recover, and he based his thesis on a chart of the futures curve.