Chesapeake Energy Corporation (NYSE:CHK) is an oil and gas play, and its fate depends mainly on the prices of the two. In early 2016, amid fears of a weakening global economy, natural gas prices dipped below $2 per million British thermal units (BTU) and oil prices fell below $30 a barrel. Chesapeake Energy faced bankruptcy rumors, and CHK stock closed at $1.59 a share on February 12, 2016.

As oil and gas prices rebounded last year, so did Chesapeake Energy.

But since my last article on Chesapeake published on May 31, CHK stock fell 24.5%, down from $5 a share to under $4.

Chesapeake released its second-quarter results on Aug. 3, posting earnings of 18 cents per share, beating expectations by 3 cents. Yet these results could not satisfy the market, and the stock continued to slide.

Chesapeake Energy stock now trades at 4.8 times forward earnings 0.39 times sales. Since CHK stock has fallen since I last wrote about it, is it now a buy?

Chesapeake Energy’s Weak Finances

CHK has now had two quarters of positive net income, but its financials still leave much to be desired. Gurufocus gives the company an Altman Z-Score, which measures bankruptcy risk, of -1.35. This puts it in the “Distress” zone. It also gives CHK an unfavorable Beneish M-Score of 13.36, which measures the risk of earnings manipulation.

Moody’s has assigned ratings of Caa2, one of the lowest ratings possible, to $750 million of Chesapeake’s notes due 2027.  

Chesapeake holds $9.85 billion in debt, more than its revenue of $9.33 billion for the trailing twelve months.

For the trailing twelve months, however, CHK has negative operating cash flow and negative net income. It also has negative book value of $2.87 a share.

This prevents us from viewing their financial position using metrics such as debt/equity and cash flow to debt.

InvestorPlace contributors have noted some additional problems with CHK stock. Chesapeake is a shale player, and Dana Blankenhorn notes that fracked wells depreciate faster. This might explain why, as Richard Saintvilus notes, CHK is increasing its capex despite oil prices hovering around $50 a barrel.

As a small, highly indebted oil and gas producer, Chesapeake Energy is more vulnerable to swings in oil prices than larger, more diversified energy companies. CHK stock is down 45% year-to-date, while oil and gas prices aren’t down nearly as much.

CHK Stock: A Contrarian Case for Commodities

But I do think investors should look more closely at commodities. Most great investors will tell you that the time to buy something is when other people are ignoring it and buying other things.

In 2000, stocks, particularly dot-com stocks, were all the rage. The expectation was that they would continue to climb forever; books such as Dow 36,000 were selling.

Prices of commodities, such as gold and oil, were very low. What if you had sold your tech holdings and rotated into “old economy” stocks such as oil and gas, mining, agriculture and fertilizers?

Click to EnlargePeople would probably have questioned your sanity, but you would have done quite well for yourself.

In 2011, the mood was quite different. China’s economy was booming, and it became the world’s No.1 consumer of industrial metals such as copper. In the U.S., trillion-dollar deficits and the Federal Reserve’s money printing raised concern over inflation. The dollar seemed like it would only continue going down, while gold and silver prices would only continue increasing.

But the opposite happened. The dollar strengthened against other currencies, and the Nasdaq Composite more than doubled from 2011 to now. Gold is about one-third off its 2011 peak, while silver has fallen nearly twice as much.

Today, U.S. stocks and tech stocks are popular, and there’s little love for oil and gas, mining or agricultural stocks. Talk of the “Trump Reflation Trade” has subsided in the past few months, while tech stocks like Amazon.com, Inc. (NASDAQ:AMZN) and Facebook Inc (NASDAQ:FB) have had an amazing year.

A contrarian might begin rotating out of tech stocks into commodities. What are some possible choices?

Some Commodity Picks

I’m not too excited about oil and gas. In my previous article on CHK, I cited an article that suggested that the bear market in oil could continue several more years.

I’m also a little worried over renewable energy becoming cost-competitive with oil and wiping out the value of oil and gas still in the ground. I want a commodity that’s less at risk of being replaced. 

In my article on CHK, I recommended oil royalty trusts, seeing them as better positioned than oil companies to ride out a bear market in energy. Unlike oil companies, oil trusts generally don’t have to borrow money and pay for rigs and drilling equipment.

I’m more interested in silver. Oil and gas could be replaced with renewable energy, but people will always want shiny metals like silver. 

As I’ve said in a previous article, silver looks cheap relative to gold. The historical average is one piece of gold for 15 pieces of silver, but now the ratio is 75.

I own shares in the iShares Silver Trust (ETF) (NYSEARCA:SLV) and the iShares MSCI Global Silver Miners ETF (NYSEARCA:SLVP). I like the latter a bit more, since it also pays a 2.61% dividend; it’s like owning silver with a coupon.

As of writing, Lucas Hahn was long SLV and SLVP.