Sweet 16 Update - May 14

Sweet 16 Update - May 14

Postby dan_s » Fri May 13, 2022 7:07 pm

I will be focusing on the Sweet 16 in my Saturday podcast.

The market is under pressure from FEAR of inflation and FEAR of the Fed. Just remember that inflation is good for commodity prices and I believe oil, ngas and NGL prices will be going a lot higher in Q3.

During the week ending May 13, the Sweet 16 lost 15.12% (OUCH!), but the profile is still up 38.83% YTD.
The S&P 500 Index lost 2.08% and is now down 15.57% YTD (another OUCH! for my IRA accounts).

All 16 companies in the portfolio reported solid Q1 results (focus on operating cash flow per share) and Q2 results will be even better. I have increased my valuations for all 16 companies because (a) in addition to strong Q1 results they all provide detailed guidance that has increased the confidence that I have in my forecast/valuation models and (b) I think oil, natural gas and NGL prices are going much higher this summer. Demand for transportation fuels spikes each summer and even more in "Post-Pandemic World".

This summer the global energy market will start to see the real impact of the sanctions against Russia. U.S. and OECD petroleum inventories are likely to get tighter in June. Demand for transportation fuels ALWAYS picks up in the summer.

IEA, in their May Oil Market Report lowered their oil demand forecast. IEA is a "political government agency" and they have a long history of under-stating oil demand. Plus, I think their forecast of rising U.S. and other non-OPEC+ oil production is just "wishful thinking". BTW OPEC+ has no spare capacity and April production for OPEC+ was more than 2 million barrels PER DAY below their official quotas. Old Joe can cross OPEC+ off his list of who to beg for more oil. My advice to Joe is that he sends some U.S. Marines to Venezuela to work out a "deal" for more heavy oil.

My Top Picks are all five of the gassers (AR, CRK, CTRA, EQT and RRC). I now think we will see $10/MMBtu ngas this summer. Take a look at coal prices, which set the floor for U.S. natural gas prices: https://tradingeconomics.com/commodity/coal

I really like the following four companies that are all trading at less than half of my current valuation.
> Callon Petroleum (CPE)
> Earthstone Energy (ESTE)
> Laredo Petroleum (LPI)
> Northern Oil & Gas (NOG)

We are sending out an updated profile on EOG Resources (EOG) on Saturday morning. EOG has announced a new dividend program and they will be paying some BIG quarterly dividends this year. Annualize dividend yield already over 8% and going higher.

I wanted to publish the newsletter on May 17, but I need more time to update the valuation in our Small-Cap and High Yield Income portfolios. I am speaking at an energy conference in Dallas on Sunday and staying over in Dallas on Monday. When I get back, I will get all of the valuations update. My goal is the publish the next edition of The View from Houston on May 23.

Hang Tough: We cannot avoid "Market Risk". We are in a "Bear Market" caused by FEAR of inflation and FEAR of our clueless Federal Government. Everything Team Biden does seems wrong to me, primarily because all of the team members are in jobs way over their skill sets. I actually feel sorry for them; going to work each day "clueless" must be tough. However, Team Biden is definitely good for oil and gas prices. The fundamentals point to much higher energy prices and Joe has no more trick that will lower gasoline taxes. This "Commodity Super Cycle" has legs.
Dan Steffens
Energy Prospectus Group
Posts: 28923
Joined: Fri Apr 23, 2010 8:22 am

Re: Sweet 16 Update - May 14

Postby Fraser921 » Sat May 14, 2022 1:18 pm

when does your weekly video get posted.

Hard to believe that Callon and Laredo are below the 1/1/2022 price?

I don't know if this affects reported price gain but the gain calculated doesn't include reinvested dividends and assumes 1 share of every position, so the larger price positions have greater weight not that there is anything wrong with that...just an observation

How is the 38.83% calculated, I come up with about 30 %, just trying to understand , not nitpick, maybe that includes divys
Posts: 1193
Joined: Mon Mar 22, 2021 11:48 am

Re: Sweet 16 Update - May 14

Postby dan_s » Sat May 14, 2022 9:26 pm

Dan Steffens
Energy Prospectus Group
Posts: 28923
Joined: Fri Apr 23, 2010 8:22 am

Re: Sweet 16 Update - May 14

Postby charlie1 » Sun May 15, 2022 12:50 pm

The five NG companies in the Sweet 16 are up 67.98 % as of Friday. The three gassers in the Elite eight are up 72.1% ( AR, EQT, CTRA}.
The Elite Eight are up 47.3%. Not a bad year and energy is still only 4% of the S&P 500.
Posts: 13
Joined: Sat May 01, 2010 10:30 pm

Re: Sweet 16 Update - May 14

Postby mikelp » Sun May 15, 2022 6:22 pm

and CVX is the only energy component in the Dow Jones 30 Industrials
Posts: 179
Joined: Thu Jun 12, 2014 10:15 am

Return to Sweet 16 Portfolio

Who is online

Users browsing this forum: No registered users and 6 guests