Sweet 16 Update - June 7
Posted: Sat Jun 07, 2025 10:20 am
Read my previous post before you read this one.
During the week ending June 6 the Sweet 16 gained 4.69%, but it is still down 9.04% YTD (not including the gain we harvested on VRN).
During the same week the S&P 500 Index gained 1.66% and it is now up 2.12% YTD. < Up 6.67% since March 31st, which is due to the FEAR of Trump's Tariff War fading.
As I point out in my previous post, the energy sector has been out of favor this year thanks to several FEARs ("Drill Baby Drill", the Tariff War, OPEC+ increasing production quotas), but I'm seeing more articles that the Wall Street Gang is starting to agree with me that the upstream oil & gas subsector is oversold. Eight of the Sweet 16 are trading at single digit PE ratios based on my 2025 forecasts. They are all profitable and free cash flow positive.
Five of the Sweet 16 (CIVI, CRGY, FANG, OVV, SM) are still trading below book value. All five of them were profitable in 2024 and they are all on track to be profitable again in 2025. More importantly, they are all currently free cash flow positive. Of this group it is stunning to me that FANG would be trading below book value. The acquisition that Viper Energy (VNOM) announced recently is beneficial to Diamondback Energy (FANG), increasing its free cash flow. Diamondback is a pure play on the Permian Basin, and it controls some of the most valuable real estate on Earth.
CIVI, CRGY and SM all trade at less than 50% of my current valuations and deep discounts to First Call's price targets.
In my opinion, Viper's takeover of STR makes VNOM a "must own" stock for Growth + Income hedge funds.
The Sweet 16 is trading at slightly less than 4X 2025 operating cash flow per share estimates, based on my forecasts. A group of this quality, should trade for an average of 6X CFPS. CIVI does have some work to do on the balance sheet, but it should not be trading at 1X CFPS and it has no near-term debt issues that I can see. CRGY, NOG and SM are trading below 2X operating cash flow. Northern Oil & Gas (NOG) looks very good to me because it has a dividend yield of 6.26% and it has strong production growth locked in.
Today I will be finishing my review of our updated profile on Solaris Energy Infrastructure (SEI), which was added to the Sweet 16 on May 23rd to replace Veren (VRN). SEI close at $30.00 on June 6. First Call's price target of $43.56 is slightly higher than my current valuation of $42.00. SEI is going to get more "love" from the Wall Street Gang because the case can be made that it is an AI stock. Because it builds natural gas fired power plants for AI Date Centers, it will be getting a lot of attention. SEI is profitable and it pays a decent dividend.
See my post about EOG's recently announced acquisition. EOG is the largest company in the Sweet 16 by a wide margin. It is a Great American Success Story that still has incredible growth locked in. I like the transaction they announced on May 30.
During the week ending June 6 the Sweet 16 gained 4.69%, but it is still down 9.04% YTD (not including the gain we harvested on VRN).
During the same week the S&P 500 Index gained 1.66% and it is now up 2.12% YTD. < Up 6.67% since March 31st, which is due to the FEAR of Trump's Tariff War fading.
As I point out in my previous post, the energy sector has been out of favor this year thanks to several FEARs ("Drill Baby Drill", the Tariff War, OPEC+ increasing production quotas), but I'm seeing more articles that the Wall Street Gang is starting to agree with me that the upstream oil & gas subsector is oversold. Eight of the Sweet 16 are trading at single digit PE ratios based on my 2025 forecasts. They are all profitable and free cash flow positive.
Five of the Sweet 16 (CIVI, CRGY, FANG, OVV, SM) are still trading below book value. All five of them were profitable in 2024 and they are all on track to be profitable again in 2025. More importantly, they are all currently free cash flow positive. Of this group it is stunning to me that FANG would be trading below book value. The acquisition that Viper Energy (VNOM) announced recently is beneficial to Diamondback Energy (FANG), increasing its free cash flow. Diamondback is a pure play on the Permian Basin, and it controls some of the most valuable real estate on Earth.
CIVI, CRGY and SM all trade at less than 50% of my current valuations and deep discounts to First Call's price targets.
In my opinion, Viper's takeover of STR makes VNOM a "must own" stock for Growth + Income hedge funds.
The Sweet 16 is trading at slightly less than 4X 2025 operating cash flow per share estimates, based on my forecasts. A group of this quality, should trade for an average of 6X CFPS. CIVI does have some work to do on the balance sheet, but it should not be trading at 1X CFPS and it has no near-term debt issues that I can see. CRGY, NOG and SM are trading below 2X operating cash flow. Northern Oil & Gas (NOG) looks very good to me because it has a dividend yield of 6.26% and it has strong production growth locked in.
Today I will be finishing my review of our updated profile on Solaris Energy Infrastructure (SEI), which was added to the Sweet 16 on May 23rd to replace Veren (VRN). SEI close at $30.00 on June 6. First Call's price target of $43.56 is slightly higher than my current valuation of $42.00. SEI is going to get more "love" from the Wall Street Gang because the case can be made that it is an AI stock. Because it builds natural gas fired power plants for AI Date Centers, it will be getting a lot of attention. SEI is profitable and it pays a decent dividend.
See my post about EOG's recently announced acquisition. EOG is the largest company in the Sweet 16 by a wide margin. It is a Great American Success Story that still has incredible growth locked in. I like the transaction they announced on May 30.