Following our first purchase of 5,000 shares of Southwestern energy (NYSE:SWN) at $4.045 several weeks ago, we have tripled the size of our holdings by adding 10,000 shares at $3.59. We believe this stock has been set up for an incredibly sharp rebound around earnings. We are betting heavily on the earnings report, given reports from competitors in the sector, as well as the fact that there is extreme value here.
Let us be clear, we are buying this as both a potential rapid return trade, but we also see extreme value here.
Natural gas is a hated sector, but this stock has lost 40% of its value in a month. It is profitable and trades at 5 times trailing earnings and just under 3 times forward earnings.
It may take a while for the stock to bounce back but this reminds us very much of oil stocks in early 2016. We think that it moves sharply on earnings, and moves higher. That said, we also feel confident in this holding longer-term.
We have added this to our “bad beat investing” portfolio which seeks to find incredibly deep value, or market insanity the leads to ‘bad beats,’ or losses that should rarely happen. While this is our second purchase, we have extreme conviction here