Sweet 16 Update - May 16

[dan_s]

Oasis Petroleum (OAS) has been dropped because it may be the only Sweet 16 company that will not survive 2020.
Solaris Oilfield Infrastructure (SOI) has been moved back to the Small-Cap Growth Portfolio. It has a lot of upside for us in 2021 and it pays a nice dividend now (7.5% annual yield).
Comstock Resources (CRK) has been added.

The main Sweet 16 spreadsheet has been updated
Tab 1: Balance Sheet data is now based on 3-31-2020 10Q, 2020 EPS are broken out by quarter and EPS forecast for 2021 has been added.
Tab 2: My fair value estimates for each stock are now up-to-date based on Q1 results and fresh company guidance. First Call target prices are as of May 15.

Comstock Resources (CRK) pulled back sharply last week because they announced a common stock offering that will close on Monday. BUY the dip, because the proceeds from the stock sale are being used to retire their preferred stock. Preferred stock is much closer to debt than it is to equity. Retiring the preferred stock is good news for common stock shareholders.

I will be looking closely at a few companies this week to fill the OAS opening.

Despite a nice move up in the price of oil and a bullish EIA storage report on May 13 the Sweet 16 pulled back. After strong Q1 reports short-term traders harvested some gains.
> The portfolio is up 27.6% since April 10th, my pick for the bottom of this cycle.
> Q2 operating cash flow will be the worst quarter for the year, but all of the companies are generating enough cash flow to cover their capex. They've all slashed D&C spending this year.

Natural gas prices pulled back a bit because we are in the high injection shoulder season. We are going to have a summer and demand for gas will ramp up in June and spike in July, unless "Global Cooling" is the new thing that the media will hype as the end of the human race. I'm actually looking forward to Global Warming this year. Historians will look back on 2020 as the year that "Click Bait" media hype destroyed LIBERTY in America.

Casinos in Louisiana are opening next week, so gasoline demand is going to pick up in Houston. There are signs that gasoline demand might be much stronger this summer since people afraid to get on a plane may take longer driving vacations. I heard that airlines may require check-ins four hours before flight times so they can do a complete health check on each passenger. TSA agents might be dropping like flies this summer. Wear clean underwear to the airport.

There are going to be incredible deals on cars and light trucks this fall.

We've published update profiles on XEC, CRK, FANG, PXD and RRC
Next week we will publish updated profiles on CPE, ESTE, CXO, OVV and TALO. They are all sitting here waiting for my final review.

During the last few days, I updated all of the forecast models for companies in our High Yield Income Portfolio. I am a little concerned about MINDP and OMP because their next two quarters will be tough. The three minerals companies (BSM, MNRL and VNOM) have a lot of upside from where they are trading today.

Before my next newsletter I want to take a hard look at LPI, SNDE and MGY.

My podcast will be on the EPG home page late today.