A key part of my reasoning was the rise in short interest on CEI stock. That may be a cynical way of looking at a stock pick, but these are different times.
As I see it, the primary investors in Camber are not particularly interested in the fundamentals.
On the one hand, this was a great call. The stock closed at 76 cents a share on July 1 and was trading at $3.82 per share by the end of September. If you were part of that trade, I hope you took profits.
That’s because CEI stock is down 62% from that point, but short interest remains extremely high so there could be another squeeze coming.
Of course, it’s not Camber Energy’s fault that CEI stock is a favorite of retail investors. I’m only saying that the volatile price movement is being caused by something other than the fundamentals of the company’s business.
If retail investors were focused on the fundamentals of the business, they might be concerned that the company has been late in delivering its SEC filings.
They could be bothered by a delisting notice the company received in May. Or, they might raise an eyebrow at how the price of CEI stock is being affected by a single tweet from a popular member of the Twitter (NYSE:TWTR) “FinTwit” community.
Influence and the Future of CEI
This influencer, who has a Twitter following of over 550,000 sent Camber Energy’s stock up 30% with a single tweet on Oct. 19. That move from $1.39 to $1.81 highlights the appeal of penny stocks. It doesn’t take much for investors to realize an impressive gain.
However, the other side of that coin is that Camber Energy is still down 62% from the high of $3.82 it reached in early September.
This was largely due to a short report that was issued by Kerrisdale Capital. Much of their reasoning centered on this same influencer who suggested that retail traders are making Camber a “pump-and-dump” stock.
The arguments for and against Camber Energy come down to its 62% interest in Viking Energy (OTCMKTS:VKIND). In August, Viking announced a licensing agreement with ESG Clean Energy for a carbon dioxide capture system.
Carbon capture is an emerging technology that appears to have the support of the Biden administration. While it’s not as “clean” as emission-free technology, it is becoming increasingly viable on a commercial scale.
In fact, many believe funding for carbon capture will make it into the infrastructure bill in whatever form it winds up taking.
However, it’s fair to say that Camber Energy is not a sure-fire carbon capture play. In fact, the short report from Kerrisdale Capital referred to the technology license as “a joke.”
This is a sector that is already loaded with competitors including Royal Dutch Shell (NYSE:RDS.A) and Chevron (NYSE:CVX). The bottom line is that investors who are betting on carbon capture as a sure-fire catalyst may be disappointed.
CEI Stock Is an Uncertain Gamble
Is CEI stock worthy of a speculative investment? Obviously, that’s for you to decide. I agree with Larry Ramer’s assessment that the company’s chances of going into bankruptcy become smaller as oil prices rise. But it bears mentioning that those chances aren’t zero either.
There is a fundamental case to be made. The price of crude oil and natural gas continues to rise, and respected sources are citing the likelihood of a colder-than-normal winter. Those dynamics could be all that is necessary to push CEI stock higher in the short term.
However, retail investors are driving the bus on CEI stock. And with the stock trading at low volume, it seems their attention is going to other places.
Without that juice, Camber Energy isn’t worth the squeeze. If you’re not comfortable with the volatility, I’d look for other energy 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 Getting Scammed
On the date of publication, Chris Markoch 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.
Chris Markoch is a freelance financial copywriter who has been covering the market for seven years. He has been writing for InvestorPlace since 2019.