Shares of Camber Energy (NYSEAMERICAN:CEI) stock have exhibited a U-shape in 2021, as the price of CEI stock dipped from a mid-February high of $2.23 a share down to an Aug. 19 low of 34 cents before a sharp ascent into September.
That move up has been subject to investors questioning why. The truth is that Camber Energy operates a fairly complex business in which it acquires majority ownership in other oil & gas entities. These entities continue to operate independently, and as in the case of Viking Energy (OTCMKTS:VKIN), list their own shares.
Camber Energy derives much of its value from the results of these companies although they haven’t been fully merged into Camber itself.
There isn’t a lot of information regarding the company in general. But it has garnered a lot of retail investor attention of late. That attention has made it an interesting investment opportunity for a certain demographic.
CEI Stock Draws Retail Attention
After dipping to that August low, CEI stock made a rapid rise to hit $1.73 on Sept. 16, due in large part to retail interest. Demand has spiked trading volume of late, including some 393 million shares trading hands on Sept. 10 as compared to the average daily volume of 63.6 million shares.
Understanding the motives behind retail investors is inherently difficult as they don’t behave like institutional investors. Nevertheless, there are three reasons which are reasonably easy to identify for the surge in interest.
Short interest currently sits at 10.5% and recent fluctuating levels have served as a beacon for Redditors and other meme stock investors.
Oil demand was on the rise throughout August. The U.S. Energy Energy Information Administration reported that August spot prices for Brent crude oil hit $71, up $26 per barrel over August 2020 prices. That news inherently makes Camber Energy look more attractive.
And finally, CEI is a penny stock. Retail investors are drawn toward risk, or at least have a greater tolerance for it. And penny stocks like CEI offer that risk/reward profile. Further, penny stocks have a greater capacity for rapid appreciation than their more established counterparts.
That’s part of the reason investors chase equities like Camber Energy: They can quadruple over the span of a month. In Camber Energy’s case this is exactly what has happened.
So, although there’s no overarching consensus as to why interest in Camber Energy has spiked, those factors likely all play a role.
Law of Gravity Prevails
The law of gravity dictates that what rises must also fall. I’m of course referring to the inherent risk in Camber Energy that it is likely to encounter soon. I can’t predict with any accuracy when this will happen. But I can predict, or at least say that I feel confident, that it is bound to happen again.
Back in February, CEI stock popped on news that it had signed a definitive merger agreement with Viking Energy. Camber Energy already controlled 62% of Viking’s shares prior to the agreement. And the agreement did call for a ‘full merger’ of the two entities. Yet, not much has changed since then.
The two companies operate separately and trade as separate stock tickers on their respective markets.
The company did show steady growth based on its most recent second quarter results. Revenue for its Viking Energy subsidiary grew 12% to hit $10.7 million in the period.
Real Disconnect Looms
I think retail investors are banking on the idea that CEI stock therefore must retrace the losses it suffered following the February merger. At that time prices peaked above $2.
That’s a very risky bet though. The market suddenly soured after that merger deal and now retail demand is propping prices up. There’s a real disconnect between the two, and very little concrete evidence by which to make strong judgments.
That is pretty much true for meme stocks in general and I would not bet that CEI stays high for long.
On Penny Stocks and Low-Volume Stocks: With only the rarest exceptions, InvestorPlace does not publish commentary about companies that have a market cap of less than $100 million or trade less than 100,000 shares each day. That’s because these “penny stocks” are frequently the playground for scam artists and market manipulators. If we ever do publish commentary on a low-volume stock that may be affected by our commentary, we demand that InvestorPlace.com’s writers disclose this fact and warn readers of the risks.
Read More: Penny Stocks — How to Profit Without Gettting Scammed
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.