RE:RE:Morningstar CPMS Dangerous PortfolioThe article is jokes. I'll post my comments below, but here is their filters for the 15 stocks (which btw almost nobody is going to see because of the pay wall):
- Quarterly earnings momentum (latest four quarters of reported earnings compared against the same figure one quarter ago. For the Dangerous Portfolio, low or negative values are preferred);
- Price-to-book and price-to-earnings ratios versus sector medians (here, high values are best, indicating the stock is overvalued relative to its peers);
- Three-month EPS estimate revision (latest consensus estimate of earnings per share versus the same figure three months ago, low values are preferred);
- Quarterly earnings surprise (consensus EPS estimate prior to the company reporting versus the actual reported EPS, low values preferred);
- Latest trailing cash flow to long-term debt (low values preferred);
- Long-term debt to equity (high values preferred).
So of course you'd expect distressed oil plays to be in there due to the quarterly earnings fiter, the long term debt filter, lack of earnings surprise.
What this filter doesn't do though is tell you if any particular company may have oversold. Most of us who bought NAL sub $1 feel it was badly oversold in relation to the recovery in oil.
In my estimation the last 4 quarters are pointless. The debt matters, but none of us are unware of their debt situation. I think this is one of those you can just ignore. We know they're in tough shape, but the bet is that they can survive.