Small-Cap Growth Portfolio Changes - July 24

[dan_s]

In the next newsletter (July 28) the following changes will be made to the Small-Cap Growth Portfolio.

> I've decided to drop Denbury Resources (DNR). The Company's hedges should allow it to survive 2020, but it will need at least $50/bbl oil to survive beyond this year. As you know if you've paid attention to my podcasts, I believe WTI will eventually rise to the "Right Price" of $65/bbl. If so, DNR has a lot of upside. Until then it is probably stuck in survival mode. Today, I rate it a HOLD.

> I will be adding Laredo Petroleum (LPI) and Magnolia Oil & Gas (MGY). Both companies are generating free cash flow from operations today. MGY has an extremely strong balance sheet and they are committed to spending only 60% of EBITDAX on D&C capex. Updated forecast/valuation models for both companies can be found on the EPG website. Log on and click on the Small Cap tab.

Gulfport Energy (GPOR), InPlay Oil (IPOOF) and Lonestar Resources (LONE) are all HIGH RISK, but I think they should be able to work out their debt issues. They are generating positive cash flow from operations and IMO it would be foolish for the LT debt holders to force them into Chapter 11. Lawyers are the only "winners" in Chapter 11.

[dan_s]

Since mid-July four Wall Street firms have published fresh reports on Magnolia Oil & Gas (MGY):

Piper Sandler 7/21/20 price target $8.00
Northland Sec 7/20/20 price target $7.50
KeyBanc 7/17/20 price target $9.00
Scotiabank 7/13/20 price target $9.00

My Fair Value Estimate is $8.80