Prem Watsa Keeps Buying Up SandRidge

Page 1 of 2

It’s been a tough year for natural gas businesses. Chesapeake Energy Corporation (NYSE:CHK), for example, is down 29% since the beginning of 2012; natural gas prices have dropped, concerns over poor corporate governance arose last spring, and the company has had to plan to sell off some of its assets to raise cash. A similar controversy is currently playing out at SandRidge Energy Inc. (NYSE:SD), as TPG-Axon Capital Management has launched an activist campaign against the company’s CEO and has nominated a shadow Board of Directors. Mount Kellett Capital Management also owns a large stake in the company (find more stocks Mount Kellett owns) and has been dissatisfied with operations at SandRidge. This stock is down 23% since the start of the year.

Prem Watsa

Prem Watsa, a value investor known as “the Warren Buffett of Canada” for his management of holding company Fairfax Financial, however, thinks that everything’s fine at SandRidge. In November he called controversial CEO Tom Ward “one of the best operators in the business” in an interview with Bloomberg News. Now Fairfax- which is another major holder of SandRidge- has increased its stake further, buying about 5 million shares of the stock in late December for a total of about 30 million shares. According to our database of 13F filings, the holding company had only owned 4.4 million shares at the beginning of October (see Watsa’s other stock picks). The battle for control of SandRidge could get nasty.

In the third quarter of 2012, revenue was up 46% from the same period in 2011. However, a large loss on derivative contracts singlehandedly gave SandRidge Energy Inc. negative operating income. It looks to us that without that loss- and, logically, without the large gain on derivative contracts in Q3 2011- that operating income was up nicely from a year earlier despite disadvantageous changes in natural gas prices. Cash flow from operations was about $580 million in the first nine months of 2012; the company used $2 billion of cash in investing activities, primarily capital expenditures, but the cash hoard increased by nearly half a billion dollars as SandRidge managed to make large borrowings and issue royalty trust units.

Wall Street analysts expect SandRidge Energy Inc. to be unprofitable in 2013. We’ve noted the activities of Mount Kellett and TPG-Axon, who are bullish primarily because they believe management can be replaced, and a number of other traders seem to have gone to straight-up bearishness on the company as 18% of the outstanding shares are held short.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

The 20 Most Underrated Movies of All Time

The 10 Fastest Growing Companies in America

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!