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Fast Money

Got a Strong Stomach? Chesapeake Setting Up for a ‘Buy’: Pro


Considering shares declined 15% on Wednesday, is Chesapeake worth a flier?

If you have the stomach for risk, trader Mike Murphy says go ahead and take a look.

“Fundamentally it’s a terrible story but I think there’s a trade coming,” he says. Murphy thinks a recent filing from Southeastern Asset Management presents the potential catalyst.

They’re the largest shareholder in Chesapeake and on Wednesday they announced plans to convert a passive ownership in Chesapeake to an active stake.

In a filing Southeastern said it may wish to discuss with Chesapeake management or third parties “possible courses of action to assist in building corporate intrinsic value per share or to cause the company’s true economic value to be recognized.”

That suggests to Murphy that Southeastern will agitate for a takeover.

"Should a deal come, I think it comes quickly and gets done in the high 20’s,” he says.

And with the stock trading around $16.75, Murphy thinks either private equity or a big integrated energy company such as Exxon could find a deal very attractive. “Chesapeake assets are valuable and many analysts say for the assets alone, it should trade at $30.”

If you're a risk taker and intrigued, Pete Najarian has a suggestion - watch the options market

“Look to see when big players come in and sniff for upside – I think there will be opportunities to trade this stock but not quite yet,” he says.

It’s worth noting the other Fast Money traders have a hard time getting behind this stock. They all say stay away - 'who knows what's the next shoe to drop?'

“If you’re looking for a nat gas play with terrible corporate governance then this is the stock for you,” chuckles Karen Finerman, “otherwise, why play here?”

In case you're not familiar with Chesapeake's woes, here's a brief synopsis:

Last Thursday, the company landed in the crosshairs of the SEC and IRS due to a program known as Founders Well Participation Program or FWWP, that granted Chief Executive Aubrey McClendon a share in each of the natural gas producer's wells,

A few days later Chesapeake said it would replace McClendon as chairman and end the FWWP  program, though McClendon would remain CEO.

Responding to events, on Wednesday McClendon said, “There's been enormous and unprecedented scrutiny of our company, and of me personally. And a great deal of misinformation has been published, and uncertainty created."

In his own defense, McClendon added: "I will not receive any compensation or benefits…from the FWWP [arrangements] that I have agreed to [forfeit]."

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Trader disclosure: On May 2, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Dan Nathan is long AAPL JAN 450 PUTS; Dan Nathan is long BAC MAY 7 PUTS; Dan Nathan is long MS MAY 16/14/12 PUT FLY; Dan Nathan is long RIMM JAN 20/25 CALL SPREAD; Dan Nathan is long CHK MAY 16 PUTS; Karen Finerman is long AAPL; Karen Finerman is SHORT AAPL CALLS; Karen Finerman is long BAC; Karen Finerman is long JPM; Karen Finerman is long WMT; Karen Finerman is long TGT; Karen Finerman is long RIMM CALLS; Karen Finerman is short SPY; Karen Finerman is short IWM; Karen Finerman is short MDY; Brian Kelly is long IWM; Brian Kelly is long QQQ; Brian Kelly is long SPY; Brian Kelly is long KRE; Brian Kelly is long USG; Brian Kelly is long CAD DOLLAR; Brian Kelly is short SWEDISH KRONE; Pete Najarian is long AAPL; Pete Najarian is long C; Pete Najarian is long MS; Pete Najarian is long INTC; Pete Najarian is long INTC CALLS; Pete Najarian is long YHOO; Pete Najarian is long INTC ; Pete Najarian is long INTC CALLS; Pete Najarian is long YHOO; Pete Najarian is long SBUX; Pete Najarian is long SBUX CALLS; Pete Najarian is long PEP; Pete Najarian is long INTC; Pete Najarian is long FIO; Pete Najarian is long VISA CALLS; Pete Najarian is long STX CALLS; Pete Najarian is long MS; Pete Najarian is long MS CALLS; Pete Najarian is long TJX CALLS; Pete Najarian is long XCO CALLS

For Randall Kroszner
Nothing to disclose with wires.