Heckmann Corp.: Value Buy, or a Bear of a Stock?

Hedge funds have generally taken their profits from companies like Heckmann Corporation (NYSE:HEK), and those who are still in have been awash in losses. Heckmann, which focuses on total water and wastewater solutions for shale and/or unconventional oil and gas exploration and production, has seen its stock lose half its value since it peaked just seven months ago.

The company, which just last week announced an exchange offer for its 9.875-percent senior notes due in 2018 for up to $250 million in principal, has seen hedge-fund interest dwindle in the past few months. At the end of 2011, 17 hedge funds had a state in HEK stock; that number was down to 12 by the end of March, with five jumping in with initial investments during the quarter.  Of the 14 hedge funds, only two had sold at least some of their positions by the end of March – Ken Griffin’s Citadel Investment Group (sold 77 percent) and Steven Cohen’s SAC Capital Advisors (99 percent).  Twelve had held steady or increased their stakes, thinking the stock was a value buy.

The stock had peaked at $6.95 per share Dec. 23.  As of noon ET July 24, the stock was trading at about $3.20 per share. At the end of March, it traded at $4.31 – a 35-percent drop from the $6.65 at the end of 2011, and the price has dropped another 26 percent since. The company is schedule to announce its quarterly earnings August 6.

It is interesting to note that it was reported in early May that four officers and directors of the company had bought nearly 32,000 shares of company stock at at average of $3.58 per, yet the stock is down 9 percent since.

It is believed that the reason for the drop could be due to decreases in capital expenses by natural-gas companies now that natural gas prices are down. Still, it is interesting that the drop has been so precipitous. The company began offering its stock in late 2007, and the stock peaked north of $10 just before the 2008 crash and it has not reclaimed its honeymoon glory since, not even sniffing $8 a share since the crash.

The company has a market cap of about $475 million and daily trading volume of 343,000 shares.