Sweet 16 Update - November 8

[dan_s]

The Sweet 16 Growth Portfolio spreadsheet has been updated and posted under the Sweet 16 Tab:
> Tab 1 of the spreadsheet is a summary of the EPS and CFPS forecasts for each company
> Tab 2 shows my Fair Value Estimate compared to First Call's Price Target for each company as of 11-8-2014

The Sweet 16 was up 1.9% for the week and now is down just 0.79% YTD.

BTW Dr. Joe Bastardi is now saying Mid-November to Year-End could be the coldest 45-day period in the eastern half of the U.S. in over 50 years. Weather has a lot to do with demand for energy, so you should all be regular listeners to Joe's weekend updates. They are only 15-20 minutes. Here is the link: http://www.weatherbell.com/saturday-sum ... ber-8-2014

I think the big cold front coming next week will draw a lot of attention to the energy sector.

All of the Sweet 16 have now reported 3rd quarter results. All 16 reported solid quarters. Some were better than others, but all were good. If you look at Tab 1 of the spreadsheet you will see my adjusted earnings forecast for each company for the 4th quarter. It is VERY IMPORTANT that you keep in mind that on the spreadsheet "Actual" EPS for 2013 and the first three quarters of 2014 are "Reported Earnings" or "GAAP". GAAP EPS include the mark-to-market adjustments on hedges and other "stuff" (mostly non-cash items) that are not included in "Adjusted Earnings". My forecasts don't include that "stuff", so you can compare them to the First Call EPS Forecasts. [Sorry if this is confusing, but the SEC/GAAP accounting rules are what they are and they do create some confusion for investors. Just keep in mind that over time the mark-to-market adjustments all net out to whatever cash the companies get or pay as a result of hedging their future production.]

All of the above is why my focus is primarily on operating cash flow per share (not earnings). Cash is what pays the bills.

You can go back through my previous posts to see what I said about each company's Q3 results. We are going to update the profiles for each one and post them to the website. NFX is already done and I will finish UNT today. If the interns do their job, all of the Sweet 16 profiles will be updated by the end of next week. [I think NFX has a lot of near-term upside. They will soon announce the sale of their China assets and I think the sales price will be a big number. Read the profile to find out why I believe NFX has about 70% upside for us. ]

Obviously, investors are still concerned with where oil prices will end up, so there will be lots of up and down days ahead. However, based on my forecasts, the Sweet 16 (as a group) is trading about 60% below net asset value.