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Debt-Ceiling Standoff Awakens Value Investors

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Chesapeake Energy (CHK - Get Report)

Company Profile: Chesapeake is an independent exploration and production company with a focus on U.S. onshore natural gas production.

AFAM's Target Price: $51.31

Potential Upside From Current Levels: 50%

Clark's Take: Clark notes that Chesapeake has historically bought properties in shale gas fields and partnered with other to share development costs. But as oil has strengthened and gas fundamentals have weakened, Chesapeake has moved to higher-margin liquids.

"Recently updated strategic plans call for a two-year overall production growth target of 25% along with debt reduction of 25%," Clark says. "Strong volume growth and good drilling prospects should allow the company to leverage its many joint ventures and capitalize on the numerous acquisitions made over the years. An aggressive hedging strategy partly offsets the inherent volatility of the business and provides cash flow protection, which supports the 1.2% dividend yield."

Walt Disney (DIS - Get Report)

Company Profile: Disney is a media conglomerate best known as the home to Mickey Mouse. The company has key operations in television, theme parks, filmed entertainment and merchandise licensing.

AFAM's Target Price: $60.01

Potential Upside From Current Levels: 54%

Clark's Take: Disney's move to bring content across digital platforms, like Apple's (AAPL) iPhone and iPad, has made the stock very attractive, Clark says. The firm counts Disney as a core holding in a portfolio as a representative of the consumer discretionary space.

"As a content-oriented company, Disney's top strategic priorities include creativity and innovation, international expansion, and leveraging new technology applications," Clark says. "Along with steady affiliate fee growth and improved theme park metrics, we expect strong growth from new franchise films (e.g. Cars 2), further leveraging of the Marvel franchise and robust international demand. Given Disney's size and financial strength, we would also expect to see additional acquisitions in the years ahead."

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CHK $1.76 3.80%
CTB $36.01 -0.30%
E $25.05 -3.50%
DIS $90.23 1.60%
STM $5.35 0.75%


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