Energy Prospectus

One of our Dallas members sent me an e-mail this morning and ask me to post it here.

"While many investors have a hard time understanding that it is best to buy hard assets when the price is depressed, I have learned my lesson over the past 35 years of market activity. Your letter has made a big difference in my life this year as it is filled with factual data and is not like the news media. While I have profited from the decisions I made in the market that’s not what has helped me the most. I am in the middle of this storm called a commodity cycle and it gets old. Even knowing that cycles do end and that’s why they have earned their name, days get long unless there is hope of the end. Your insight and careful analysis of true fundamentals has gotten me to the to the other side. I think 2017 will be good but more difficult in the oil stocks. They have upside from here but there is nothing like catching the bottom which we did thanks to your guidance!"

I co-founded EPG in 2001 with Kevin Hopkins and decided to make it my life's work in 2006. As most of our Founding Members know, Kevin took a job as a scout for the National Hockey League in 2005. He was an outstanding college hockey player and really knows the game.

My mission is to help EPG members make wise investment decision by providing good fundamental analysis, including macro analysis of the oil & gas markets. Sometimes I get it wrong, like when Saudi Arabia decides to flood the market with oil and sacrifice over $200 Billion of their wealth. I will admit that the depth and length of this oil cycle was much worse than I thought it would be. However, cycles do come to an end and the U.S. energy sector will survive and thrive in the future. 2016 was actually a good year for the Sweet 16 and most of our other model portfolio companies. 2017 should give us higher oil prices (thanks to OPEC coming to their senses) and a much tighter U.S. market for natural gas and NGLs.

Dan,
I want to echo the member's post. I have enjoyed and profited from my membership to EPG. I worked the oil fields for 30 years and road several booms and busts. I knew this bust created some investment opportunities and have been able to successfully commit funds based upon my membership.
Your analysis enables us to allocate resources to companies that have the best chance to be successful.
Thanks and have a Happy New Year.

Thanks for the kind words.

I just want to remind all of you that they are called the "Sweet 16" for a reason. I track and model a company for over a year before I "promote" it to the Sweet 16. I have an extremely HIGH level of confidence in my forecast models for these companies. The Sweet 16 is our "Flagship".

Based on e-mails that I get and most of the commentary here, I think a lot of EPG members are hoping to find the next "Ten Bagger" and think they have to invest in stocks trading under $10 to get big gains. Let me suggest that instead of going after speculative small-caps, try long-dated options ("Leaps") on high-quality large-caps. Personally, I have made a lot more money selling Puts than buying Calls, but it is risky strategy and you need to keep a lot of cash in your brokerage account.

For example, Continental Resources (CLR) finished 2016 at $51.54/share, up 124% for the year. On 12-30-2015 you could buy Jan 2017 $25 Calls at around $2.00. Today those calls traded for $26.50, net of commissions that is close to a 1,200% gain in one year. PLEASE DO YOUR HOMEWORK ON CALLS AND PUTS BEFORE YOU MESS AROUND WITH THEM.

My New Year's Resolution is to be very careful in selecting companies for our Small-Cap Growth Portfolio. BTW more than half of the companies in our Small-Cap Growth Portfolio today are not too far from being qualified for the Sweet 16. CPE, CRZO, MTDR and SN definitely have enough current production to qualify.

I will still mention small-caps here and in the newsletter that look good to me.