Sweet 16 Update - April 12

[dan_s]

The Sweet 16 Growth Portfolio spreadsheet has been posted under the Sweet 16 Tab
> Tab 1 of the spreadsheet is a summary of the EPS and CFPS forecasts*
> Tab 2 shows my Fair Value Estimate compared to First Call's Price Target for each company as of 4-12-2014

*You can see the individual company forecast models by clicking on their logos.

The Sweet 16 is up 10% YTD, which is darn good compared to the S&P 500 which is down 1.8% YTD. The markets are rather confused right now. Investors don't know what to make of this conflict with Russia and the tech stocks (which IMHO are grossly overvalued) have been getting hammered. It is nice to own companies with real assets. I think the U.S. GDP growth will accelerate in Q2, so this little selloff is probably nothing to worry about, especially for the energy sector stocks. Our Sweet 16 are all going to report strong Q1 results and positive outlooks.

MTDR and UNT are leading the pack. I took a hard look at my forecast model for MTDR this past week and I raised my valuation to $29/share. UNT and RRC are the two S-16 with the most exposure to natural gas. UNT is still trading at less than 4X my CFPS forecast for 2014 and I think it has 40% more upside and maybe a lot more if gas prices move higher into year-end.

We sent out a new profile on Carrizo Oil & Gas (CRZO) this week. It is a strong candidate to move into the Sweet-16. I am thinking of moving ROSE back to the Small-Cap Growth Portfolio. I still think ROSE is grossly undervalued, but it hasn't gotten any attention since I moved it into the Sweet 16 almost three years ago. I sure don't know why a company averaging 30% production growth hasn't gotten more love.

SM Energy (SM) looks like a "Screaming Buy" up to $80/share. First Call's Price Target is now $92.32, a slight increase this week.

First Call's price target for Gran Tierra Energy (GTE) is now over $10. Selling $7.50 Puts on GTE is a good idea ("self talk").

My focus this month has been on our Small-Cap Growth Portfolio companies. All the ones I've looked at so far look great. I am going to add AXAS to the portfolio in the next newsletter. MIND reported "OK" 4th quarter results, but it is really not a growth company anymore, so I will be dropping it. It is still solid and trading below my Fair Value Estimate, so don't panic if you own it.

Have a good weekend. I hope to see a lot of you at our luncheon in Dallas on April 16 and in Houston on April 24. Mark Pease, President of BreitBurn Energy Partners LP (BBEP) is speaking in Dallas. Mark is great and BBEP is one of my Top Picks for High Yield.

Dan S

PS: Log onto the website and check out "John White's Energy Macro Review for April, 2014". John is one of the smartest energy sector analysts that I know. I spend a lot of time looking and the "Big Picture" for oil and gas and so should you.