In this article, we discuss the 5 best stocks to buy according to Don Morgan’s Brigade Capital. If you want our detailed analysis of Brigade Capital’s history, investment philosophy, and hedge fund performance, go directly to 10 Best Stocks to Buy According to Don Morgan’s Brigade Capital.
5. Chesapeake Energy Corporation (NYSE:CHK)
Brigade Capital’s Stake Value: $9,406,000
Percentage of Brigade Capital’s 13F portfolio: 1.05%
Number of Hedge Fund Holders: 67
Chesapeake Energy Corporation (NYSE:CHK), an independent exploration and production firm, acquires, explores, and develops assets in the United States for the production of oil, natural gas, and natural gas liquids from subterranean reservoirs. Don Morgan’s Brigade Capital owned 115,975 shares of Chesapeake Energy Corporation (NYSE:CHK) as of June 30, worth $9.4 million, and representing a 1.05% chunk of its 13F portfolio’s weighting.
Benchmark analyst Subash Chandra on August 1 commenced coverage of Chesapeake Energy Corporation (NYSE:CHK) with a Buy rating and a $137 price target. Chesapeake has risen from bankruptcy to pursue a long-term return-of-capital strategy “that is not fully reflected in the company’s discount multiple to the E&P industry,” according to Chandra. Chesapeake has bought $5 billion in assets in the previous six months, which has enhanced the company’s capital intensity and requires “proportionately less capital to sustain greater production levels,” according to the analyst.
Among the hedge funds tracked by Insider Monkey, 67 were long Chesapeake Energy Corporation (NYSE:CHK) in Q2 2022, with combined stakes worth $3.5 billion. Howard Marks’ Oaktree Capital Management is a leading position holder in the company, with 10.5 million shares worth $851 million.
Here is what ClearBridge Investments Dividend Strategy has to say about Chesapeake Energy Corporation (NYSE:CHK) in its Q1 2022 investor letter:
“In the early days of the invasion, we made two measured changes to the portfolio based on longer-term fallout we anticipate from Russia’s invasion of Ukraine. First, we initiated small positions in U.S. natural gas producers Chesapeake (NYSE:CHK).
Given its superior environmental profile compared to other fossil fuels, we have long favored natural gas in our energy holdings. Combustion of natural gas releases 50% less CO2 than coal, 25% less CO2 than gasoline and dramatically less particulate and pollution, per the U.S. Energy Information Administration. With the advances in shale production this century, the U.S. has become a natural gas powerhouse with some of the lowest-cost and largest reserves in the world. But because natural gas is difficult to ship across the ocean (it must be liquefied, which requires expensive infrastructure on both ends of the voyage), America’s gas bounty has ironically proved a burden for U.S. producers.
The surplus of natural gas in North America has resulted in low prices and weak earnings for gas-focused producers. Exports, while growing, are restrained by the high cost of building export infrastructure. Europe, in a Faustian bargain, has relied on abundant, inexpensive Russian gas transported by pipeline.
Despite the abundance of low-cost resources and a superior environmental profile, the investment case for U.S. natural gas producers was previously unfavorable due to oversupply in the domestic market.
In the days preceding the invasion, we were quick to realize the war would change global energy flows. Europe is shifting away from Russia and toward new sources of imported liquified natural gas. We purchased our stakes in Chesapeake to capitalize on these trends. The recently announced energy pact between the U.S. and Europe represents an early positive datapoint in support of this investment thesis.”
