Monday I published performance data on my "Mad Money" model portfolio, and, as promised, I am publishing a short blurb on each portfolio company. My three categories are "No Brainer"(the shares have risen significantly and I see further upside), "In Progress" (not a winner yet, but I believe the market is grossly undervaluing the company's fundamentals), and "Reconsidering" (shares have declined and I am determining whether or not the fundamentals warrant the lower valuation).
"No Brainers"
Arabella Exploration (AXPLF): After seeing their presentation at the OGIS conference in New York three weeks ago, I am even more convinced that this management team has created a huge drilling opportunity in the Southern Delaware Basin in West Texas. It's a very early-stage company whose shares are still not registered in the U.S., and thus I am playing Arabella through its warrants to maximize upside.
True Drinks Holdings (TRUU): True Drinks' recent management conference call highlighted AquaBall's status as a category killer. In the last 13 week period, according to Nielsen, overall sales in the kids' flavored hydration category rose 3.7%. While AquaBall's nearly 1000% growth can be related to growth from a low base, the key point is that sugary competitors Capri Sun and Kool-Aid -- the antitheses to AquaBall's sugar-free goodness -- are down 18% and 8%, respectively, in the same time period. Buying habits are shifting, and AquaBall is in the sweet spot.
Acme United (ACU): Strong fourth quarter results, continued execution and the 2.2% yield that I locked in on Acme United are big relative selling points for this solid, little consumer products company. Especially vs. an overall market that I believe has little to no upside.
BPZ Resources (BPZ): I heard a lot of bullish talk on Peru's energy market from other managements at OGIS, confirming BPZ management's upbeat outlook. I believe they'll show continued operational improvement when first quarter results are reported May 9.
"In Progress "
Magnum Hunter Resources (MHR): 2014 will be a year of transition as Magnum Hunter looks to focus on the Utica and formulates plans to realize full value of its valuable Eureka Hunter Pipeline asset. As visibility improves on those two fronts, I expect share price outperformance.
GreenHunter Resources (GRH): Coming out of OGIS I was fully convinced that this company finally has the right strategy and management team in place to execute their Utica-based water disposal plans. Still seeking financing; consummation of a capital raise would push the stock much higher.
Armour Residential REIT (ARR): I own Armour Residential REIT strictly for the dividend, and I believe the market will continue to be "amazed" by how long 10-year Treasury rates remain depressed -- thereby increasing the relative attractiveness of Armour's government-guaranteed MBS holdings.
Torchlight Energy (TRCH): All is proceeding to plan for Torchlight Energy in Oklahoma, and now the market is awaiting early results from Torchlight's joint venture with Ring Energy (REI) in Kansas and completion of a capital raise. I expect drilling results from Torchlight's Kansas play to be reported by the end of May and the capital raise to be completed much sooner.
"Reconsidering"
Miller Energy Resources (MILL): Miller issued an operational update this morning, and as management had foreshadowed, Miller's production figures came in well below the targets management had set in late 2013. Including the recently acquired North Fork Unit, Miller's total production currently stands at 4,700 barrels of oil equivalent per day. Late last year management had been pointing toward a 7,000 boe/d target by the end of April. Miller's wells have high decline rates (as much as 50% in the first year) and thus they must continue to hit on new prospects to maintain production growth.
I believe today's announcement was the final piece of bad news from Miller. Miller's testing shows strong upside from their first well in the Sword prospect, their Tennessee assets are progressing faster than I had anticipated and the acquisition of a new rig from Baker means quicker execution on Cook Inlet prospects. Thus I believe the $5 per share mark Miller approached today will be the bottom for the shares. But I am paid for performance. So, I am holding Miller shares for existing Mad Money accounts, but for new accounts I have been substituting PDC Energy (PDCE) in Miller's place.
Harvest Natural Resources (HNR): Harvest's shares have recovered in recent weeks, but the market still needs to see more progress on Harvest's divestiture program.
