Sweet 16 Update - April 27

[dan_s]

During the week ending April 25 the Sweet 16 gained 0.86%, but it is still down 13.62% YTD. The portfolio was up 0.93% YTD on March 31st.
During the week ending April 25 the S&P 500 Index gained 4.12%, it is still down 6.06% YTD. The index was down 4.59% on March 31st, so most IRA accounts are almost back to "Pre Tariff War" levels.

FEAR of "Drill Baby Drill" is almost gone, but FEAR of the "Tariff Wars" is still keeping a lot of investors on the sidelines. FEAR of recession is the primary headwind for oil prices. Natural gas storage refill season is the primary reason for the decline in the front month NYMEX contract for HH gas dipping below $3.00. The greedy "Paper Traders" that held on to the MAY25 HH gas futures contract too long took some big losses last week.

As I have posted here many times, selloffs caused by FEAR don't last very long. This Tariff War is not a Pandemic. It will end in a few months.

All of the Sweet 16 individual forecast/valuation models have now been updated on the EPG website based on my updated oil & gas price deck. The Q2 forecasts are based on the WTI oil price averaging $62.50/bbl and HH natural gas price averaging $3.25/MMBtu.
> ALL OF THEM are going to report solid Q1 2025 financial results and
> ALL OF THEM should remain free cash flow positive all year.
> Most of them have hedges in place that reduce some of the commodity price risk. Hedges are shown at the bottom of each company forecast model.
> ALL OF THEM produce a mixture of oil, natural gas and NGLs. EQT produces the highest percentage of natural gas. You can find the production mix at the bottom of each company's forecast model or on Tab 2 of the Sweet 16 Summary Excel workbook.

Today I will finish updating all of the forecasts for the Small-Caps. On Monday I will finish updating all of the forecasts for the High Yield Model Portfolio companies. I have already posted a lot of the updated forecast models to the EPG website under the Small-Cap and High Yield tabs.

All of the forecast models are macro driven Excel spreadsheets, which you can download to Excel on your computer and change the commodity prices at the bottom to see how revenues, net income and operating cash flow are impacted by higher or lower oil, gas & NGL prices.

I do have larger than normal "cushions" in my forecast for Adjusted Operating Cash Flow for Q3, Q4 and the year 2026. I am also using what I believe are conservative multiples of annualized operating CFPS to come up with current valuations for each company.

The models for EQT, MTDR and RRC have been updated for the Q1 2025 financial results that they announced last week.

Announcing Q1 results this coming week will be: AR, MGY, NOG and SM

I HOPE to finish my April newsletter by Tuesday, April 29.