Sweet 16 Update - August 24

[dan_s]

An updated Sweet 16 Growth Portfolio spreadsheet has been posted to the website.

Tab 1 is a summary of my EPS and CFPS forecasts, Tab 2 shows my Fair Value Estimate compared to First Call's Price Target for each company as of 8-24-2013. You can download it to Excel.

Detailed forecast models for all of the Sweet 16 can be found under their logos. Log on, click on the Sweet 16 Tab, and click on the logo of the company you want to look at. All of the forecast models are "macro driven", which means you can download them to Excel and change the forecast production volumes and commodity prices to see how they impact my valuations. I also compare my EPS, CFPS and Revenues to what First Call is showing today.

As a group, the Sweet 16 is up more than 20% YTD, but it is still more than 41% below my Fair Value Estimates. After Labor Day we should see a lot more attention paid to this sector, especially if crude oil prices remain elevated. The NYMEX WTI strip is in backwardation (front months are higher priced than out months), which is very bullish for near-term oil prices. Plus, the global demand for crude oil will be high for the next six months. Violence in the Middle East and North Africa will keep a large geopolitical risk premium on Brent crude.

Q3 and Q4 results should be very strong for this group, which remains heavily weighted to oil.

Many weather forecasters are now expecting an early start to winter this year. If so, natural gas prices should move up to $4.00/mmbtu on NYMEX. That is still a very low price, so don't load up on "gassers". IMO the "smart way" to add more exposure to Ngas is to buy more XEC, EOG, SM and UNT. They all have a lot of gas reserves and most of it is held by production.

Range Resources (RRC) is the only "gasser" in the Sweet 16. I like it because it has a commanding stake in the Marcellus Shale, the best gas resource play in the world. RRC is a takeover target for all of the majors. Range is getting about $7.50/mcfe for their Marcellus production since it is very rich in liquids and high btu gas.

Statoil appears to be building up for another takeover. KOG, WLL, OAS and possibly CXO are on their radar screen.

I am cracking the whip on the interns this week to finish updated profiles on all of the Sweet 16. I just finished up KOG and we are working on BCEI, CXO, CLR, ROSE and SM. They will be sent out as Flash Alerts this week.

I talked to Bonanza Creek (BCEI) on Friday. They should be hosting a luncheon for us in Houston mid-November. They are going to have very impressive Q3 and Q4 results.

[dan_s]

An updated Net Income and Cash Flow Forecast model has been posted for KOG under the Sweet 16 Tab.

[dan_s]

Concho Resources Inc. (CXO): An updated profile and forecast model for CXO have been posted under the Sweet 16 Tab.