Sweet 16 Fair Value Updates
Posted: Sat Feb 25, 2012 10:03 pm
I have updated the Net Income and Cash Flow forecast for each S-16 company that has reported 4th quarter results. EPG members can find them under the Sweet 16 Tab. You need to log on, then click on the individual company logos under the Sweet 16 Tab.
Also under the S16 Tab is a spreadsheet that shows my Fair Value estimate for each company, including those dropped from the portfolio this year. In the next column is the current First Call price target for each company. Where my Fair Value is much higher, you can expect to see analysts' upgrades soon.
So far, every S-16 has report rock solid Q4 results. CLR and EOG are the major players in the Bakken and Eagle Ford, making them PRIME TAKEOVER targets for one of the Majors or NOCs.
You may have noticed some confusing headlines about company earnings. In a nut shell, the accounting rules for unrealized gains and losses (thanks to Enron) are totally screwed up. Add in the difference between Full Cost accounting and Successful Efforts and it is a wonder that any investors can figure out what is going on. My advice is to ignore reported earnings per share and focus on cash flow per share. I have a masters degree in accounting and it is hard for me to figure this stuff out.
This afternoon I compared OAS to KOG. OAS looks much better but both have fantastic growth potential.
Some of the companies that have yet to report Q4 results are now trading near or above my Fair Value estimate. That should not be a concern since I will probably increase my Fair Value estimates if they hit or exceed my forecast.
As a group, the Sweet-16 is still 34% below my combined Fair Value estimate so we still have a long way to go, especially if the price of oil keeps going up.
Also under the S16 Tab is a spreadsheet that shows my Fair Value estimate for each company, including those dropped from the portfolio this year. In the next column is the current First Call price target for each company. Where my Fair Value is much higher, you can expect to see analysts' upgrades soon.
So far, every S-16 has report rock solid Q4 results. CLR and EOG are the major players in the Bakken and Eagle Ford, making them PRIME TAKEOVER targets for one of the Majors or NOCs.
You may have noticed some confusing headlines about company earnings. In a nut shell, the accounting rules for unrealized gains and losses (thanks to Enron) are totally screwed up. Add in the difference between Full Cost accounting and Successful Efforts and it is a wonder that any investors can figure out what is going on. My advice is to ignore reported earnings per share and focus on cash flow per share. I have a masters degree in accounting and it is hard for me to figure this stuff out.
This afternoon I compared OAS to KOG. OAS looks much better but both have fantastic growth potential.
Some of the companies that have yet to report Q4 results are now trading near or above my Fair Value estimate. That should not be a concern since I will probably increase my Fair Value estimates if they hit or exceed my forecast.
As a group, the Sweet-16 is still 34% below my combined Fair Value estimate so we still have a long way to go, especially if the price of oil keeps going up.