Chesapeake Energy: Energized
A big domestic natural gas producer gets a vote of confidence.

There's no natural gas in the Chesapeake Bay off of Maryland, but Chesapeake Energy is awash in the stuff. The company is based in Oklahoma and is America's largest active onshore gas driller, with 87 rigs at work. A few days ago, Chesapeake raised its forecasts for 2007 gas production and average prices, earning positive Wall Street attention. Yesterday, Goldman Sachs upgraded Chesapeake's stock (symbol CHK) from neutral to buy. Three days earlier, JP Morgan had promoted it to overweight.
Given the company's single-minded focus, it's no surprise that the movements of its stock are tethered to a single product, natural gas. In recent weeks, spot-market and futures prices for gas have soared, primarily because of soaring demand for power during a blistering heat wave that has engulfed much of the U.S. Of course, prices could reverse course if the weather moderates, but it's hard to see them weakening much. Demand is rising fast and it's harder to find new supplies. Chesapeake's strategy of drilling in well-known onshore gas fields makes for a high degree of confidence that its wells will deliver.
Chesapeake trades at $33, about the midpoint of its 52-week range. At nine times trailing earnings per share, it's priced about the same as other major production companies. It yields little, just 0.7%. But that's okay because Chesapeake is not a utility but a true growth company. It claims a 33% compound annual increase in gas production for the past four years, gobs of interesting development projects in Texas and the rest of the Southwest, and a big position in many gas fields where the margin between production costs and the market price of gas is wider than the national average. If you're an energy bull and enjoy the comfort of investing close to home, here's a chance to buy shares of a first-class company at a fair price.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.

Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Kosnett is the editor of Kiplinger Investing for Income and writes the "Cash in Hand" column for Kiplinger Personal Finance. He is an income-investing expert who covers bonds, real estate investment trusts, oil and gas income deals, dividend stocks and anything else that pays interest and dividends. He joined Kiplinger in 1981 after six years in newspapers, including the Baltimore Sun. He is a 1976 journalism graduate from the Medill School at Northwestern University and completed an executive program at the Carnegie-Mellon University business school in 1978.
-
Where There's a Will, There's a Way Your Assets Will Be Distributed as You Wish
Your will is the backbone of a strong, adaptable estate plan that ensures what you leave behind goes to your selected beneficiaries. Without a will, state laws determine who gets your assets.
-
What You're Losing if You Cut Back on 401(k) Contributions
Missing out on the benefits of the employer match and compounding growth could force you to work longer and lower your standard of living in retirement. Here are some alternative options.
-
If You'd Put $1,000 Into Bank of America Stock 20 Years Ago, Here's What You'd Have Today
Bank of America stock has been a massive buy-and-hold bust.
-
If You'd Put $1,000 Into Oracle Stock 20 Years Ago, Here's What You'd Have Today
ORCL Oracle stock has been an outstanding buy-and-hold bet for decades.
-
How to Invest for Rising Data Integrity Risk
Amid a broad assault on venerable institutions, President Trump has targeted agencies responsible for data critical to markets. How should investors respond?
-
If You'd Put $1,000 Into Sherwin-Williams Stock 20 Years Ago, Here's What You'd Have Today
Sherwin-Williams stock has clobbered the broader market by a wide margin for a long time.
-
If You'd Put $1,000 Into UnitedHealth Group Stock 20 Years Ago, Here's What You'd Have Today
UNH stock was a massive market beater for ages — until it wasn't.
-
What Tariffs Mean for Your Sector Exposure
New, higher and changing tariffs will ripple through the economy and into share prices for many quarters to come.
-
How to Invest for Fall Rate Cuts by the Fed
The probability the Fed cuts interest rates by 25 basis points in October is now greater than 90%.
-
Are Buffett and Berkshire About to Bail on Kraft Heinz Stock?
Warren Buffett and Berkshire Hathaway own a lot of Kraft Heinz stock, so what happens when they decide to sell KHC?