I don’t wish to brag (who am I kidding, of course I do!), but three weeks ago, in these very pages, I wrote a positive piece on Goodrich Petroleum (GDP). At the close of that day, the stock stood at $17.11. As I write, it is trading at over $26. Obviously, 50% in three weeks is a fairly good result, but if you missed that one, don’t despair. There is another way to play the same field, and I literally mean field.
The reason for my positive view of GDP was their heavy involvement in the Tuscaloosa Marine Shale oilfield, or TMS. Predictably enough, I guess, the success there that Goodrich announced which resulted in their stock surging also lifted other firms involved in the exploration of the play. One of them is Comstock Resources (CRK). In November of last year they announced the acquisition of 55,000 acres close to already successful wells in the TMS.
Before we go any further, the above, a 1 month chart for CRK doesn’t represent my usual idea of value. The stock is up over 30% in the last month and I am not usually a big momentum guy. My time in the interbank forex market left me with a natural aversion to jumping in when a move had already taken place. I hate the idea of providing the liquidity for early adopters to take a profit. In this case, though, the good news that will really push the stock could still be yet to come.
First, though, let’s look at the risks. Comstock has a large exposure (around 68%) to natural gas…