It is always a good idea to have a diversified portfolio. This is why we should take a closer look at stocks from two different industries in this article -- Chesapeake Energy (CHK, Financial) and Micron Technology (MU, Financial). The purpose of this article is to determine whether these two stocks are good long-term bets.
Starting off with Chesapeake
In the Utica and Southern Marcellus regions, Chesapeake has started its ATEX pipeline shipments, which has resulted in a solid NGL growth profile. With the help of these ATEX pipelines the company plans to maximize its margins. It is also evaluating the possibilities to utilize third-party ethane volumes, which will fulfill its ethane commitments, while rejecting its own portion of ethane.
In a strategic move, the company is spending less capital while still achieving its production growth targets. Chesapeake has also utilized the excess cash it generated during the quarter to purchase a number of rigs and compressors with long-term lease agreements. These transactions will facilitate its future cash commitments.
As we have already seen, Chesapeake has increased its cash flow outlook to the range of $5.8 billion to $6 billion. This will be mainly used in two ways: First, about $340 million will be used to increase its benchmark oil and gas prices for the year. Second, around $190 million is associated with a change in the hedging presentation assumptions.
During the first quarter, the company also delivered $425 million a day to the TETCO-M3 hub where it received an average premium to Nymex Henry Hub prices in excess of $5 per Mcf. It is because of these positive effects of the premium pricing, Chesapeake’s 2014 natural gas price outlook remains unchanged at a $1.60 to $1.70 per Mcf.
Chesapeake’s plan to spin off its oil field services business is perfectly on track and the process is going on. The spinoff is done as a part of its strategic move to streamline its operations. It expects the spin off to be completed by next month, which will reduce around $1.1 billion debt from its balance sheet.
Micron's moves
Micron’s graphics business had a record quarter shipping over 100 million gigabits. Major customer qualification was witnessed for GDDR5 product and positive yield improvement on its 25 nanometer process. The digital TV segment had an impressive quarter highlighted by a major win for its new I/O products with a key consumer electronics partner. In addition, better than expected sales was experienced for major game console customers.
Despite some market softness in NAND, Micron remains optimistic on the long-term demand profile for the end market segments. Both from a unique growth and the density per unit perspective decline in enterprise SSD business continue to represent strong growth segments.
Conclusion
It is clear that both companies are looking to make their businesses more efficient by way of their strategies. Moreover, since the two companies are from different industries, they will do a good job of making investors' portfolios more efficient. Thus, it will be a good idea to take a closer look at both companies from an investment perspective.
