RE: RE: RE: RE: MMs are starting to accumulate @bonjovi
Yes it is easy to see $10.00 in value in this stock. A comparison with WCP and CPG
shows that based on production, reserves, book value, net asset value or operating netbacks
it is pretty clear that the market should be valuing LEG at about $10.00 right now.
The question that needs to be answered is why do the shorts continue to short LEG?
Anyone who has shorted LEG has made money on the trade and their motivation
should now be to cover the trade. Why are they not covering now? Is their any reason to expect
LEG to go substantially lower?
The only answer I can see is that a lot of funds are into long-short pairs trading on the
theory that gas prices will move up and oil prices will move down, hence they will go long a gas
stock (easy to find low prices in gas stocks) and short an oil stock. (LEG is one of the few oil
stocks that are Liquid, PAYS NO DIVIDEND, IS NOT A LARGE CAP AND IS EXPLORATORY)
LEG is therefore a GO TO stock for shorting without regard for valuation considerations.
This Laisse - Faire attitude with regards to pairs trading will at some point cost these
funds a lot of money as opposed to being a low risk paired trade.