Cramer will often get behind a stock relentlessly because he sees long-term value in the company. One of those companies is Dynegy , which has been experiencing a pullback over the last few weeks. Cramer likes to check his work, so he’s going right to the source with Dynegy CEO Bruce Williamson on set.
The main reason the stock has retreated is because a subsidiary of Chevron sold 97 million shares in May. Is that a signal that Dynegy is fundamentally headed in the wrong direction, or is it just a move that sparked panic with investors?
Chevron originally got into Dynegy as a play on natural gas, Williamson says, but Dynegy has since sold that business – so Chevron in turn sold its shares for strategic reasons. Chevron pulling out of the company doesn’t affect its earnings per share or the underlying economic performance, he says.
Dynegy has 32 power facilities in 15 states, mostly in the Midwest. Cramer considers the company the ultimate “not in my backyard” play because Americans, while dependent on energy, fight like crazy against new power plants being built in their neighborhoods. That ends up being a strategic opportunity for Dynegy as it already has so many plants online. It’s the scarcity value that Cramer thinks will drive this stock forward.
Williamson says the value of Dynegy’s assets that are already up and running provides a great platform for investors to buy into. Energy demand keeps going up, but the number of new power facilities isn’t rising with it.
Even on the pullback, Cramer is sticking with Dynegy. Going into the decline, he says he’d be an “aggressive buyer.”
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