Sandridge Energy (SD) Update: Ready To Roar Higher?
A little over a month ago, I let you in on a little secret about Sandridge Energy (SD)…
The oil and gas exploration company has quickly improving earnings, growing revenues, and surging production in an up and coming shale play- the Mississippian Lime.
I also revealed a legendary billionaire hedge fund manager, Leon Cooperman, who thinks Sandridge is worth at least $10 a share.
Since my early August article, Sandridge shares have essentially been at a standstill, trading in a relatively tight range between $5.80 and $5.10.
Take a look…
As you can see, Sandridge took a beating after reporting Q2 earnings results early last month. Jittery investors apparently wanted more of a positive spin from the company, even though it posted greatly improved quarterly numbers.
However, it didn’t take long for astute investors to start accumulating shares on the cheap. Sandridge spent less than three weeks trading at the $5.10 area before excess demand carried it back to multi-month highs near $5.80.
Thanks to the recent rise, shares are sitting in a very interesting technical position…
As you can see in this long-term chart, the stock is just starting to break above an important downtrend line (red circle). This technical breakout is still in its early stages, but a high volume break above $6.00 will further shift momentum into bullish investors’ favor.
Is there something else behind this recent move higher?
Not only is this stock a great value play, but there’s an interesting rumor that Repsol SA (REPYY) may have its sights set on Sandridge.
According to a recent Wall Street Journal article, the Spanish oil giant is looking to strengthen its foothold in the burgeoning US oil shale industry. And buying an undervalued, asset-rich company like Sandridge makes perfect sense.
Maybe you remember, Norwegian oil giant Statoil (STO) did the same when they purchased Brigham Exploration in 2011. That buyout deal sent the Brigham shares soaring 20% overnight.
Now let’s be clear…
The rumor I just mentioned should be taken as such. When it comes to oil stock investing, most of the time, rumors end up being just wishful thinking by desperate investors.
But it’s important to point out that institutional investors hold 78% of Sandridge’s outstanding shares. In fact, hedge fund heavyweights like Riverstone Holdings, Carlyle Group, TPG-Axon, Fairfax Financial, and the aforementioned Leon Cooperman hold a combined $1.2 billion stake in Sandridge.
Folks, well-heeled investors like these don’t pile into a company just for the heck of it. They clearly see remarkable value mixed with outstanding upside potential.
So keep a close eye on Sandridge in coming weeks…
Lingering buyout rumors, mixed with solid operational performance, are quickly pushing this long overlooked company to the forefront. There’s a very good chance of outsized gains as a new round of profit seeking investors pile into the shares!
Until Next Time,
Justin Bennett
***Disclosure*** I am long Sandridge Energy (SD) $4 call options
Category: Commodities
