Carl Icahn Increases Stake in One of the Worst Year-to-Date Performers of the S&P 500
Undoubtedly Carl Icahn (Trades, Portfolio) is one of the best investors in the world. He founded Icahn Capital LP, which had $31.89 billion under management at Dec. 31, 2014. The investor reported increasing his stake in Chesapeake Energy Corporation (CHK), a $9.33 billion market cap, according to GuruFocus Real Time Picks .
The filing
On March 11, Icahn purchased 6.6 million shares of the company for $14.15. In the next table we can appreciate the transactions:
Name of Reporting Person | Date of Transaction | Amount of Securities | Price Per Share |
High River LP | 03/11/2015 | 1,320,000 | 14.15 |
Icahn Partners LP | 03/11/2015 | 3,127,252 | 14.15 |
Icahn Partners Master Fund LP | 03/11/2015 | 2,152,748 | 14.15 |
The transactions were filed with SEC on March 23.
The company
The company engages in the acquisition, exploration and development of properties for the production of oil, natural gas and natural gas liquids (NGL) from underground reservoirs in the United States.
Chesapeake Energy Corporation's shares lost 28.31% in a year-to-date basis and lost 45.34% of its market value in the last year.
Revenues rose by 11.2% and led earnings per share increased in the fourth quarter compared to the same quarter a year ago. During the past fiscal year, the company increased its bottom line. It earned $1.83 versus $0.68 in the previous year. For the next year, Wall Street expects a high contraction in earnings ($0.04 versus $1.83).
With almost 10 million net acres of onshore oil and gas assets, Chesapeake holds leading positions in several regions (Barnett, Haynesville/Bossier, Marcellus, Eagle Ford, Powder River Basin, Utica, and Anadarko Basin) regions, while continuing with its liquids-rich plays as part of a move to diversify away from natural gas. Further, we are confident about the company�s ability to increase production and reserves. On the other hand, a serious risk is the prolonged drop in oil and gas prices that could affect margins or slowdown new plans.
Relative Valuation
As of today, the firm's share price is $14.03. Chesapeake Energy Corp's diluted earnings per share for the trailing 12 months ended in December 2014 was $1.55. Therefore, the P/E ratio is 9.07. To use another metric, its price-to-book ratio of 0.67x indicates a premium versus the industry average of 1.03x while the price-to-sales ratio of 0.51x is below the industry average of 2.76x.
Final comment
In the article we focus on the famous American finance tycoon, Carl Icahn (Trades, Portfolio), who is known for his major influence on investing policy and skill in the markets, who is constantly seeking opportunities.
Disclosure: As of this writing, Omar Venerio did not hold a position in any of the aforementioned securities.
This article first appeared on GuruFocus.
