Sweet 16 Valuation Updates - May 6

[dan_s]

The Sweet 16 companies are always my top priority.

Q1 results and updated guidance from each company are now pouring in. I am updating my valuation models as fast as I can, but it does take me 2 to 3 hours to do a decent job. After the forecast models have been updated, we will publish updated profiles on each company. My four MBA "helpers" are already working on them.

I hope to publish the May newsletter next week, after I get all of the Sweet 16 models update.

I will get to the other model portfolio companies next week.

So far the Q1 results have been good, but there is still a lot FEAR hanging over this sector. Even a small pullback in commodity prices can cause a selloff like we had this morning. Oil, gas and NGL prices have rebounded much faster than I expected at the beginning of the year and I think oil has a lot more upside. The Sweet 16 are all going to have strong years if WTI just stays over $60/bbl and HH gas stays over $2.75/mcf.

Keep in mind that lots of investors do not understand the mark-to-market accounting rules for hedges. A lot of CPAs don't either. When there are big increases in commodity prices, companies with a lot of production hedged can be forced to report loses when they are actually generating lots of cash flow. "Cash is King" in this business, so use selloffs like LPI this morning as a great buying opportunity. Always focus on "Operating Cash Flow" and learn to ignore reported earnings. The accounting rules for hedges and impairment are so misleading that Wall Street was forced to invent "Adjusted Net Income" for their forecasts.