Is Chesapeake Energy a Good Portfolio Play?

With shares of Chesapeake Energy (NYSE:CHK) trading around $27, is CHK an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Chesapeake is involved in the acquisition, exploration, development, and production of natural gas and oil properties in the United States. As the world continues to grow, energy is at the root of this expansion. In order for countries to build infrastructure, machinery requires energy products and services. Look for this company to capitalize on the growth of the world as it provides a product that is essential to development.

An overhaul of the operations at Chesapeake Energy in 2013 is expected to pay dividends for the Oklahoma City-based company in 2014. Doug Lawler took over as the company’s chief executive in June and immediately began making some changes to the company’s free-spending ways. It’s starting to pay off, and the general outlook for the company is positive. Chesapeake’s margins are improving and per-unit production costs are decreasing. Capital expenditures have been reined in, and assets have been shed. And those efforts will continue in 2014, analysts project. Chesapeake also is expected to rely more heavily on operating cash flows to fund drilling spending — a stark contrast to the Chesapeake of old when racking up debt was the norm.