Sweet 16 Update - July 20
Posted: Sat Jul 20, 2024 1:49 pm
It has been two weeks since my last S-16 update since I was on vacation in Alaska July 6-14. We picked good dates for the trip since we missed hurricane Beryl. However, our home did get hit. We are up to about $20,000 in damages and we still have a lot of work to do on our front yard. We had a 50-foot ash tree fall across our front yard that did only minor damage to the roof. The cost just to remove the tree was $4,100. We were lucky because many homes in our neighborhood have much more damage. We've lived in Sugar Land for 30 years (50 miles from the Gulf of Mexico) and we've only had minor hurricane damage three times.
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Since July 3 the Sweet 16 gained 0.60% and is now up 11.46% YTD, not including dividends. It has been a good year, but the Sweet 16 is still trading at a 50.75% discount to my current valuation. Since 2003, when EPG became my full-time job, we've had several years where the Sweet 16 has generated the most gains in the 2nd half of the year. The current Sweet 16 is trading at just 3.53 X operating cash flow per year. That is an extremely low multiple for profitable companies of this size and quality.
The S&P 500 Index lost 0.67% during the last two week, but it is still up 15.08% YTD. A hand full of large-cap tech (AI) stocks are responsible for most of the gain. Most of the AI companies might have difficulty finding enough reliable electricity to open their data centers.
APA Corp. (APA) got a bit of over-due love from the Wall Street Gang, gaining 8.8% since July 3, but it is still down 6.79% YTD. APA's Q2 results will include a full quarter of Callon's production. My valuation is $48/share.
TipRanks: "In the last 3 months, 20 ranked analysts set 12-month price targets for APA. The average price target among the analysts is $37.78. The price targets range from $27 to $57 per share." There are many of the Wall Street Gang that use very conservative assumptions for companies that have yet to report a full quarter of results after a merger the size of the Callon Petroleum acquisition that closed April 1st. I do expect that APA's price target will move toward my valuation after the company reports Q2 results on August 1.
EQT Corp. (EQT) dropped into last place, down 7.19% YTD, due to the recent dip in natural gas prices. APA and EQT should both report solid Q2 results. EQT has a hedge book that protects them from the dip in gas prices. They also sell a lot of NGLs.
The four top performing Sweet 16 companies are:
> Diamondback Energy (FANG) up 32.49% YTD. < Viper Energy (VNOM) also made a nice move higher. Viper is one of my Top Picks in our High Yield Income Portfolio because Diamondback's "Mega Merger" with Endeavor Energy that will close in Q4 is going to benefit Viper.
> SilverBow Resources (SBOW) up 30.02% YTD. < The merger with Crescent Energy (CRGY) should close by July 31.
> Magnolia Oil & Gas (MGY) up 25.88% YTD.
> Permian Resources (PR) up 18.31% YTD.
Since WTI oil and HH ngas prices were higher than what I based my Q2 forecasts on, all 16 should report solid Q2 results.
Vital Energy (VTLE) and Crescent Energy (CRGY) trade at the deepest discounts to my valuation.
Under the Sweet 16 tab on the EPG website you can find my updated Sweet 16 Summary Spreadsheet, which shows by current valuation and First Call's price target for each company. The 3rd tab of the spreadsheet has updated information for the companies in our Small-Cap Growth Portfolio and our High Yield Income Portfolio.
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Since July 3 the Sweet 16 gained 0.60% and is now up 11.46% YTD, not including dividends. It has been a good year, but the Sweet 16 is still trading at a 50.75% discount to my current valuation. Since 2003, when EPG became my full-time job, we've had several years where the Sweet 16 has generated the most gains in the 2nd half of the year. The current Sweet 16 is trading at just 3.53 X operating cash flow per year. That is an extremely low multiple for profitable companies of this size and quality.
The S&P 500 Index lost 0.67% during the last two week, but it is still up 15.08% YTD. A hand full of large-cap tech (AI) stocks are responsible for most of the gain. Most of the AI companies might have difficulty finding enough reliable electricity to open their data centers.
APA Corp. (APA) got a bit of over-due love from the Wall Street Gang, gaining 8.8% since July 3, but it is still down 6.79% YTD. APA's Q2 results will include a full quarter of Callon's production. My valuation is $48/share.
TipRanks: "In the last 3 months, 20 ranked analysts set 12-month price targets for APA. The average price target among the analysts is $37.78. The price targets range from $27 to $57 per share." There are many of the Wall Street Gang that use very conservative assumptions for companies that have yet to report a full quarter of results after a merger the size of the Callon Petroleum acquisition that closed April 1st. I do expect that APA's price target will move toward my valuation after the company reports Q2 results on August 1.
EQT Corp. (EQT) dropped into last place, down 7.19% YTD, due to the recent dip in natural gas prices. APA and EQT should both report solid Q2 results. EQT has a hedge book that protects them from the dip in gas prices. They also sell a lot of NGLs.
The four top performing Sweet 16 companies are:
> Diamondback Energy (FANG) up 32.49% YTD. < Viper Energy (VNOM) also made a nice move higher. Viper is one of my Top Picks in our High Yield Income Portfolio because Diamondback's "Mega Merger" with Endeavor Energy that will close in Q4 is going to benefit Viper.
> SilverBow Resources (SBOW) up 30.02% YTD. < The merger with Crescent Energy (CRGY) should close by July 31.
> Magnolia Oil & Gas (MGY) up 25.88% YTD.
> Permian Resources (PR) up 18.31% YTD.
Since WTI oil and HH ngas prices were higher than what I based my Q2 forecasts on, all 16 should report solid Q2 results.
Vital Energy (VTLE) and Crescent Energy (CRGY) trade at the deepest discounts to my valuation.
Under the Sweet 16 tab on the EPG website you can find my updated Sweet 16 Summary Spreadsheet, which shows by current valuation and First Call's price target for each company. The 3rd tab of the spreadsheet has updated information for the companies in our Small-Cap Growth Portfolio and our High Yield Income Portfolio.