Energy XXI

[dan_s]

I move EXXI to our Small-Cap Growth Portfolio because I still think the stock is grossly undervalued. At 6-30-2013 they reported a 50% increase in proven reserves and the stock hardly moved. Today it is trading for just over 3X CFPS.

Yes, they are offshore and they will drill a dry hole from time-to-time, but this is a very underappreciated stock.

My updated forecast model is available under the Watch List Tab.

My Fair Value Estimate is $50/share, which is actually less than their net asset value per share just using proven reserves.

[GeraldR]

I'm glad to see this post Dan. I was beginning to think nobody but me believes EXXI is waaay undervalued. I sold EXXI Jan puts at $29 and $28 last month and this morning sold some Mar $25 puts. Looks like ill get a good many shares on options expiration this month. They are growing reserves and production and are buying back shares. The company also has a track record of success.

[dan_s]

Wall Street is in love with the shale plays, so companies like EXXI and DNR may continue to trade a large discount to their net asset values. Your strategy of selling Puts on the dips is a good one. I am doing the same thing. Just be careful and don't get too overexposed. I got killed on Puts in the 2008 crash.

I think these company's stock repurchase programs reduces downside risk.