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NEW YORK (
Chesapeake Energy(CHK - Get Report) may be one of the greatest short-term trades an investor can make, but that's because it continues to be such a frustrating idea as a long-term investment.
Chesapeake Energy does so much wrong -- at least as far as Wall Street and investors are concerned -- that any time it makes good on a promise or an unexpected catalyst emerges -- the stock rallies. Those pops usually come right after the shares have hit a low-water mark, making Chesapeake Energy shares ripe for a quick profit. Any more than a quick hit, though, and an investor is asking for a lot out of a stock that continues to bounce around and seems to always come back to at least the low-$20s.
Chesapeake Energy has been a dry hole for long-term shareholders.
Consider these three recent examples.
In 2010, longstanding balance sheet concerns about Chesapeake -- its appetite for land acquisitions relative to a mounting debt pile -- kept the company's shares in the low $20s. In December 2010, activist investor Carl Icahn came out of nowhere to disclose a significant stake in the company. In the three months after that news broke, Chesapeake shares rose as high as $35, as the market bet the Icahn would finally get Chesapeake Energy CEO Aubrey McClendon "into line."
Hardly. Icahn took his short-term payday and got out of Chesapeake. Chesapeake did announce a plan to significantly reduce debt after Icahn's investment, a plan it says it is sticking to this year. However, shares ran from the $35 mark right back down to the low $20s.
In July 2011, Chesapeake shares returned to $35 or so after the company said it valued its Utica acreage -- which it planned to find a joint venture partner for - at $15 billion to $20 billion. That spike didn't last long either: Shares went the way of all Chesapeake Energy trading spikes and back to the low-$20s by November.
Chesapeake shares began trading 2012 in the low-$20s, and already this year the stock has experienced two mini-rallies, though nothing like the "heyday" of its $35 share price.