According to Thompson, in the last year Chesapeake Energy's CEO Aubrey McClendon purchased 2.6 million shares of CHK, at a cost of $111 million. What does he know that you don't?
Following is a summary of the main points made by McClendon on "Fast Money".
Why have you purchased so many shares of your company?
“I like Chesapeake and its prospects,” replies McClendon. “I think we trade at a significant discount to our value today. So anytime I can scrape some money together I go out and I buy the stock.”
What supports your optimism?
"Look at the company’s growth rate, replies McClendon. “Our production was up 31% year over year and our adjusted net income was up 32% and yet the company is trading at about 12 times annualized earnings off this quarter. I think it’s a great growth company with very powerful fundamentals that trades at a substantial discount to where many of its peers trade.”
Where should it trade?
“It’s not my business to say, but I think it’s got a double in it and that’s why I bought so much,” replies McClendon.
How much of your performance is tied to the price of the commodity itself?
“Not very much,” says McClendon. “It’s a bonus when the commodity cooperates and we’re really the most active hedger in the business so we take a lot of the commodity price risk out. Right now we think that nat gas prices will stay in the $8-$10 range.. and we’ll do quite well in that kind of flat price environment.”