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Chesapeake Should Rally Into $20’s: Pro Trader

Friday, 25 May 2012 | 4:18 PM ET

With shares of Chesapeake down 30% ytd, one of the Fast Money traders says the time to pull the trigger is now.

As BlackRock increased the size of its stake and reports suggested Carl Icahn hit the buy button, trader Mike Murphy of Rosecliff Capital also pulled the trigger.

“We bought the stock around $15.77,” he says.

Murphy is convinced that BlackRock, Ichan as well as other major shareholders such as Southeastern will increase shareholder value.

Chesapeake has been under the microscope since mid-April, when the SEC launched an informal inquiry into a company program that granted CEO Aubrey McClendon a share in each of the wells Chesapeake drills.

It was later revealed that McClendon used his personal stake in Chesapeake wells as collateral for $1.1 billion in personal loans.

Chesapeake Energy; JPMorgan's Risky Bets
Michael Murphy, Rosecliff Capital, provides an options strategy on Chesapeake Energy, and a look at JPMorgan's high risk bets on private equity investments, with Greg Zuckerman, Wall Street Journal senior writer. Also, the FMHR crew weigh in on trading the bank stocks.

Chesapeake responded by moving to end the well participation program 18 months early in June 2013 and cutting director compensation. Also, McClendon agreed to step down as chairman.

Despite the attempts at damage control, a growing chorus of shareholders have been calling for changes. And Murphy thinks they get them.

“I think Chesapeake’s board has one option and that’s to sell the company,” he says. “(As a result) I think the stock pushes into the low $20’s at least.”

Trader Stephen Weiss doesn’t agree with the trade at all.

“Look at the balance sheet,” he says. “They have $11 billion in debt. It would be a major dilutive acquisition to anyone who buys them. I can’t imagine anyone buying them.”

Posted by CNBC's Lee Brodie

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Trader disclosure: On May 25, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Pete Najarian is long AAPL; Pete Najarian is long C; Pete Najarian is long GDX CALLS; Pete Najarian is long INTC; Pete Najarian is long SBUX; Pete Najarian is long PPE; Pete Najarian is long HPQ; Stephen Weiss is long JCP; Stephen Weiss is long COH; Stephen Weiss is long CMI; Stephen Weiss is long CHK; Stephen Weiss is short QCOM; Stephen Weiss is short UVP; Stephen Weiss is short EURO; Jon Najarian is long AH CALL SPREADS; Jon Najarian is long GLD CALL SPREADS; Jon Najarian is long ZNGA CALL SPREADS; Jon Najarian is long GLUU; Jon Najarian is long DDMG; Jon Najarian is long CIGX; Jon Najarian is long CBOE; Jon Najarian is long CME; Steve Grasso is long ASTM; Steve Grasso is long BA; Steve Grasso is long D; Steve Grasso is long FRO; Steve Grasso is long LNG; Steve Grasso is long MHY; Steve Grasso is long MO; Steve Grasso is long PFE; Steve Grasso is long S; Steve Grasso is long XLU; Steve Grasso is long ZAZA

For Jens Nordvig
Nothing to Disclose

For David Goerz
David Goerz is long EBAY
David Goerz is long WDC
David Goerz is long WFC
David Goerz is long HD


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