Antero Resources (AR) is a company that specializes in the research and development of hydrocarbon and hydrocarbon sourcing. The headquarters is located in Denver, Colorado and employs more than 500 people. The company has recently seen their stock prices tank as a raging battle has erupted in the oil industry. It remains to be seen how the company plans to rebound in this business climate. It is no surprise that investors are showing interest now that the shares have fallen under 90 cents. This could present a good opportunity to start investing in the sector, which has fallen on hard times during the COVID-19 pandemic. For investors looking to jump in, this could provide the perfect opportunity to pick up cheap shares. It is not surprising that people are hesitant to jump in after the energy sector has gotten pummeled in the crisis. However, this doesn’t mean that there aren’t bargains to be had.
A Troubled Market
One of the nice aspects of Antero Resources is that it can help to diversify an energy sector portfolio. The company provides exposure to assets that are less common, such as natural gas, ethane, and natural gas liquids. Interestingly enough, less than 1% of their total revenues came from petroleum in the 2019 fiscal year. This proves the company to be an interesting option in the midst of an oil war. With petroleum prices tanking, there is a question as to where people will go to get their energy. The aggregate fall in demand for energy resources has hit the company, as many others in the energy sector, very hard. It remains to be seen how the company will trim the fat in order to remain profitable in these lean times. It appears that the demand for energy is going to be dampened for the foreseeable future, so in order to remain favorable the company will likely have to adjust.
One consideration that might given investors pause is the negative net income that plagued the company even before the energy downturn. This is concerning considering that 2019 was a boom year for most stocks in the energy sector. If the company was not able to find their footing then, it is reasonable to expect that the coming months could be very difficult. As many companies are running to the government for a bailout, mid-caps like AR can find themselves in a precarious position. The key to surviving this slump is to cut costs by any means necessary and hope that there is a major change to the relevant macro-economic factors. The good news is that the company has many tangible assets that will provide a short-term buffer against market instability. It will be important for AR to hone in on the resources that are most important and stick with what they do best.
Adapting With the Times
Mid-caps face unique problems with the government’s recent bailout. Oftentimes these companies are too big for the small business clauses, but too small for specialized loans. This puts them at a disadvantage relative to larger players in the industry. Navigating these complexities will tell the story in the coming weeks and months for the fate of the company. However, it is clear that investors who are interested should commit to the long haul. The shares of the price are unlikely to turn around in the near future, so any investment should be made to hold. This is a commonality across the entire market. Do not expect quick returns in this environment. The best play for almost any stock is to hold and wait for the market to turnaround. While it can be frustrating to do at this time, it will pay dividends in the long run (in more way than one).
Though if you buy the stock it is important that you are willing to hold for an extended period of time. There is hope that the pandemic will soon end, and people will return back to work. However, many experts foresee the lockdowns lasting for several months, if not a year. Until the economy resumes normal function, there is not much value in having a stock like AR. Though if you hold through this period, the returns will be well worth the wait. This investment is not a get get-rich-quick stock, but rather a buy and hold long-term investment. The prices of shares have bottomed out, so this is a good time to add it to your portfolio. It is always nice to diversify in the energy sector. This period has made it much more difficult to predict returns, but that doesn’t mean that the trendline won’t be favorable.
A Reasonable Price
It is also nice to have energy companies that don’t rely on the price of petroleum to produce a profit. As America has started to produce its own natural gas, the market has quickly become flooded with new alternative energies. AR has done a good job of stemming the change and will likely continue to be adaptable in the future. This company has many years of experience in a vast array of economical climates. Sharp money thinks that they will be able to navigate this situation without too much damage to their bottom line. Given that the stocks are currently priced under $1, it’s not a bad idea for the average investor to jump in. The company has proven itself to be profitable and its book value remains strong, given its many tangible assets.
If you are satisfied with buying and holding, then it would not hurt to give AR a look. It’s an interesting offering in the marketplace and will likely hold its value for some time to come. Except big and exciting things when the bull market finally comes back around, until then it is best to watch and wait.
Written by Bill Vix
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