Sweet 16 Update - June 1

[dan_s]

I have updated all of my forecast models and Fair Value Estimates ("FVE") for each company in our Sweet 16 Growth Portfolio. You can find a spreadsheet that summarizes my forecast models under the Sweet 16 Tab. Individual forecast models can be found by clicking on the company logos under the Sweet 16 Tab.

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Tab 2 of the spread sheet compares my FVE per share to First Call's target price for each company. Personally, I think this is one of the most valuable tools on the EPG website. If you see First Call's price target moving up week-after-week, that is a very good sign. That means very smart analysts are updating their models and starting to see the same potential that I do.

For example, my FVE for SM Energy (SM) is still way above the First Call price target but the FC price target has been moving up since the Q1 results came out. SM has multiple core areas, so it is a bit harder to figure out. The young analysts assigned to companies of this size tend to be more conservative when they can't figure something out. SM is trading at less than 4X CFPS, which is pretty darn low for a company with double digit production growth locked in. SM also gives investors some low risk exposure to improving natural gas prices. See the production forecast at the bottom of my forecast model and you will understand. We should send out an updated profile on SM next week. Read it carefully.

All of the Sweet 16 pulled back on Friday with the rest of the market. Since most of the declines came in the last two hours of trading, it looks like month end window dressing by the fund managers. Let's see what happens on Monday, the start of a new month.

We are now 2/3 of the way through Q2. Unless there is a big move in oil & gas prices, which is unlikely, Q2 results are going to be very good for the Sweet 16.

Whiting Petroleum (WLL) attracted a big buyer mid-week. It is still trading at a very low multiple and way below its peers in the Bakken.

HP and RRC are getting close to my FVE, but they are such high quality companies, they deserve to trade at high multiples.

The Q2 results I'm the most eager to see are Gulfport's. It will be interesting to see how the market reacts. All eyes are on the Utica Shale wells, but don't forget the Canadian Oil Sands potential. They have been investing for years in Grizzly and the first major project should be on-line in Q3.

Read the report I sent out today on REXX. It may be going into our Small-Cap Growth Portfolio.

A couple of my interns have been more focused on final exams (which I encouraged), so they are behind on the updating profiles. We should publish reports on CRZO, EOG, KOG, ROSE and SM this week.