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Chesapeake Energy Corporation Message Board

  • SnellingM SnellingM Jun 19, 2008 10:05 AM Flag

    My "Good Problem"

    This is a little bit brag, but mostly request for advice & discussion:

    I've been in CHK since end of Dec '03 (at about $24.50). It was a bit heavier than (~12% of) my usual allocation - typically only 10-15 holdings. Now, that it's up 175%, I'm WAY overweight (almost 30% of my portfolio!) in CHK. But, since I'm confident that it's going to continue to appreciate, I am reluctant to sell any in order to "diversify."

    Advice? Suggestions? Abuse?

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    • use the up in your portfolio w/chk to put a lil margin money into cred, fto, frd, and other stocks with great near term potential . . .chk is going to $100/share anyway . . . I own chk from under $3/sh so I be happy . . .

    • Thanks for the input folks. Very much appreciated. Lot's of good ideas.

      I should clarify a bit: This is my IRA account (and I'm still on the youngish side of 50) that I'm discussing. Therefore, I'm not allowed PUTS, CALLS, or Margin... ruling out those choices. I'm about convinced to sell 15-20% to get back closer to my comfort level of allocation in a single stock.

      The problem with that is: I'm pretty much convinced that CHK will be going north of $80, perhaps $100 in less than a year. It almost seems like giving money away to sell here.

      • 3 Replies to SnellingM
      • <<This is my IRA account (and I'm still on the youngish side of 50) that I'm discussing. Therefore, I'm not allowed PUTS, CALLS . . .>>


        Depending on your investment experience (and your broker), you should be able to do all these things in your IRA. Any broker should allow you to sell covered calls. As long as you have the experience, you may also buy (uncovered) puts or calls in an IRA.

        <<The problem with that is: I'm pretty much convinced that CHK will be going north of $80, perhaps $100 in less than a year.>>

        If you are "convinced," hold on until $80 before you begin to trim. As long as you know what you are invested in and have strong support for your belief of a company's underlying value, you should be willing to hold until it reaches the price defined by your sell discipline.

        It sounds to me like you need to define what your sell discipline is (i.e. after a holding has moved up x%, or after a holding has reached your pre-determined "fair value"). This should probably be your starting point for all of your holdings.

      • You can certainly sell covered calls, and that is one of the suggestions. I do it all the time in my IRA. If they don't let you, change brokers (suggestion Schwab, Vanguard).

        For instance when CHK was near 60, I sold some January 09 $60 calls (covered by having the stock in the account) for a $9.00 cash return. Now the stock will probably be called away in Jan., but I have over a 10%++ gain in less than a year. Really almost a $20% gain on a yearly basis.

        So, yes I give up those CHK shares, but I make the gains above. I also purchased more CHK at about the same time, so I don't feel too bad that I only made a nice profit, but I still have more CHK on hand in case it still goes up more.

    • You can certainly sell enough to get your portion of investment back and let the rest ride with profit money.

      Maybe not diversify but keep the cash. The market continues to fall, today below 12K, so we don't know if we'll have a huge drop or not but there is no catalyst for this market right now, is there?

      It may not be just our markets we have to keep an eye on. Other countries are going through what we are going through as well. Oil is very high and so are the gas pumps. Consumer spending is slowing in many areas.

    • As long as you own the common, I personally wouldn't lighten up if I had your portfolio until CHK hits $80-$85.

      I have had 90% of my portfolio (certainly much smaller than yours) in CHK - mostly through short-term options. I have only now begun to shift to more conservative longer-dated and deeper in the money options. At $80-$85, I will likely shift more to common with my riskier calls.

      The only other reason I would lighten up now, if I had your portfolio, is if you think another holding has better prospects/valuation. I don't have 2000 stocks in my head like Cramer, but I haven't found a better combination of valuation/growth than CHK currently. My plan is to reduce the risk of my exposure to CHK over time (less leverage), but don't expect to allocate significantly elsewhere until $100-$120+.

    • Sell calls against your position.

    • you are a good thinker aren't you?

    • Anybody else?

      [looks like I should have trimmed my position when I posted the question!]

    • If you want to get defensive, consider KGC or TC. I still think commodities have a ways to run. Global demand for materials remains strong despite all the recession talks. I own both.

    • Lighten up because you never know. I made the mistake of riding Garmin and Hansen all the way up -- and down. Leaned my lesson, again. My suggestion is take some off the table.
      Good luck.

 
CHK
29.02-0.29(-0.99%)Jul 10 4:05 PMEDT

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