Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What:The price of crude oil is surging today, which is taking energy stocks up with it. Magnum Hunter Resources Corp is just one of the many energy stocks surging today as its stock was up 18% by mid-afternoon as crude oil rallied 8%.
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So What:What's really odd about Magnum Hunter Resources' rallying stock prices is the fact that it's really a natural gas company. Around 90% of the company's production is natural gas, leaving it with little exposure to oil. However, investors do see some upside to oil prices as the company does have assets in the Bakken shale that it has been planning to sell. Rallying oil prices could help the company get a bit more value for that asset should it move forward with that sale.
Another reason why surging oil prices are likely causing Magnum Hunter's stock to soar is possible short covering from traders bailing on positions in beaten-down energy stocks. This would make sense as Magnum Hunter Resources had 28% of its outstanding shares sold short as of a few weeks ago. So, when short-sellers run to cover it, this causes a stock's price to surge as there's more buyers than sellers.
Now What: For the all intents and purposes, however, today's rally in the price of oil is basically meaningless to Magnum Hunter Resources. Oil is simply such a small portion of its production that it alone doesn't justify the rally.
The article The Odd Reason Why Magnum Hunter Resources Corp.s Stock is Surging 18% Today originally appeared on Fool.com.
Matt DiLallo has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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