Sweet 16 Update - May 13

[dan_s]

The Sweet 16 was up 0.90% for the week ending May 12th. The S&P 500 Index moved down 0.38% during the week.

The Sweet 16 is still down 14.54% YTD as investors have to climb the "Wall of Worry" over what OPEC is going to announce on May 25th. Will they or won't they extend their production limiting agreement? I think they will, but no one knows for sure.

All of the Sweet 16 reported solid Q1 results and half of them raised their full-year production guidance. Q1 2017 was MUCH BETTER than Q1 2016 and all of these companies have more than enough cash flow from operations + liquidity to fund their growth plans. The Sweet 16 is a "growth" portfolio.

Five of the S-16 moved down slightly: AR, CRZO, XEC, DVN and RRC. AR and RRC are "gassers" and the others are not considered pure plays on the Permian Basin, although XEC and DVN have significant operations in the Permian. CRZO has a nice block of leasehold in the Permian, but they are primarily an Eagle Ford company. Wall Street has very little interest in the "gassers" this time of year, but that will change as we move out of the "shoulder season" mid-June.

Gulfport Energy (GPOR) had the biggest move up for the week, primarily because it was grossly oversold. The company's first quarter results beat my forecast and they are on-track to report EPS over $2.00 this year and cash flow per share over $3.50. Gulfport has a strong track record of production and proven reserve growth. Go to the forecast model and look at production growth on row 58.

I have adjusted my forecast models for all 16 companies, which you can view on the EPG website. My valuations have been updated and their first quarter results and operations updates raise the confidence that I have in my forecast/valuation models.

The near-term outlook for oil prices depends on what OPEC does on 5/25, but demand is definitely exceeding supply by a rather significant margin in the 2nd quarter. That will continue in the 3rd quarter no matter what OPEC does. The IEA's monthly "Oil Market Report", which comes out next week, should confirm this. I am expecting the report to have some bullish comments about demand growth in China and India.

An updated Sweet 16 spreadsheet will be posted to the EPG website this afternoon. It shows my valuation for each stock compared to the First Call price targets. Keep in mind that it takes several weeks after quarterly results are announced before the First Call price targets are fully adjusted. I check them each week and so should you.

[dan_s]

Read this: http://www.zerohedge.com/news/2017-05-1 ... o-long-oil