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Our regular column will be back January 8 , 2014

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Our blog goal is to continue the recent pace of 4 % per month growth .



Santa Claus Rally In Shipping Sector

Just about the night before Christmas and I have the right to brag about the results of our commitment to the recovery in the shipping sector.

We EARN our performance fee :

DryShips also has a strong exposure to the spot market, with 20 out of its 28 Panamax vessels, its two Supramax vessels, and one out of its 12 Capesize vessels operating on a spot basis, which should aid earnings going forward if the BDI continues to climb upward as international drybulk trade demand growth seems to indicate. The company has estimated that if spot rates rise by $5,000, it will add $65.8 mill. and $79.3 mill. to its EBITDA or free cash flow generation, respectively, and the numbers rise even higher to $131.6 mill. and $158.7 mill. respectively if spot rates rise by $10,000, and to $263.2 mill. and $317.3 mill. if spot rates rise by $20,000.

We have been following the activities of leading fund managers via numerous articles on Seeking Alpha, and on our website, and have observed a strong correlation between the activities of leading fund managers and the price performance of stocks in the succeeding quarters. Hence, we view the small accumulation of DryShips shares by leading fund managers in the latest 3Q/2013 as a positive, lending further credence to our thesis that DryShips shares are in buy territory based on the projected turnaround in the BDI index and the promising prospects for its majority owned subsidiary ORIG.


Above Average
As of market close 23 Dec 2013.
Open 3.72 P/E Ratio (TTM)
Last Bid/Size 3.92 / 30 EPS (TTM) -0.86
Last Ask/Size 3.93 / 45 Next Earnings
Previous Close 3.69 Beta 2.97
Volume 13,375,548 Last Dividend
Average Volume 9,362,839 Dividend Yield 0.00%
Day High 3.95 Ex-Dividend Date
Day Low 3.69 Shares Outstanding 403.8M
52 Week High 4.00 # of Floating Shares 347.0658M
52 Week Low 1.53 Short Interest as % of Float 4.17%


As of market close 23 Dec 2013.
Open 9.98 P/E Ratio (TTM) 9.2x
Last Bid/Size 9.50 / 5 EPS (TTM) 1.08
Last Ask/Size 11.00 / 3 Next Earnings 17 Feb 2014
Previous Close 9.98 Beta 1.69
Volume 806,616 Quarterly Dividend 0.0600
Average Volume 805,088 Dividend Yield 2.33%
Day High 10.57 Ex-Dividend Date 20 Nov 2013
Day Low 9.90 Shares Outstanding 83.4M
52 Week High 10.57 # of Floating Shares 41.96572M
52 Week Low 3.15 Short Interest as % of Float 1.39%


Above Average
As of market close 23 Dec 2013.


Open 9.24 P/E Ratio (TTM)
Last Bid/Size 9.70 / 7 EPS (TTM) -2.13
Last Ask/Size 9.71 / 19 Next Earnings 10 Feb 2014
Previous Close 9.06 Beta 1.25
Volume 3,038,216 Quarterly Dividend 0.1600
Average Volume 1,603,536 Dividend Yield 6.58%
Day High 9.83 Ex-Dividend Date 26 Nov 2013
Day Low 9.16 Shares Outstanding 74.2M
52 Week High 12.00 # of Floating Shares 71.04741M
52 Week Low 7.00 Short Interest as % of Float 13.24%


Above Average
As of market close 23 Dec 2013.


Open 13.04 P/E Ratio (TTM)
Last Bid/Size 12.62 / 6 EPS (TTM) -57.05
Last Ask/Size 13.10 / 3 Next Earnings
Previous Close 12.34 Beta 1.89
Volume 452,161 Last Dividend
Average Volume 282,985 Dividend Yield 0.00%
Day High 13.43 Ex-Dividend Date
Day Low 12.57 Shares Outstanding 29.1M
52 Week High 13.43 # of Floating Shares 28.41736M
52 Week Low 5.28 Short Interest as % of Float 0.59%
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Safe Bulkers Inc. New 52 Week High

Confirming our faith in a shipping sector recovery .

This will be our last entry on the blog for the year – we may have the odd entry and some not so odd . The regular edition returns January 8 , 2014


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Below Average
As of 17 Dec 2013 at 2:58 PM EST.


Open 9.03 P/E Ratio (TTM) 6.6x
Last Bid/Size 9.41 / 5 EPS (TTM) 1.21
Last Ask/Size 9.44 / 13 Next Earnings 17 Feb 2014
Previous Close 9.09 Beta 1.69
Volume 405,018 Quarterly Dividend 0.0600
Average Volume 630,654 Dividend Yield 2.55%
Day High 9.44 Ex-Dividend Date 20 Nov 2013
Day Low 9.02 Shares Outstanding 82.7M
52 Week High 9.44 # of Floating Shares 41.22136M
52 Week Low 3.15 Short Interest as % of Float 1.39%

Anadarko Petroleum Update Target $108

APC : NYSE : US$83.67
Target: US$108.00

Anadarko Petroleum is an oil and gas E&P company with global operations in countries including the United States, Algeria, Ghana and Mozambique. The company is headquartered in The Woodlands, TX.
All amounts in US$ unless otherwise noted.

Energy — Oil and Gas, Exploration and Production
Investment recommendation
We would BUY shares of APC on weakness in light of the company being
ruled liable in the Tronox suit. The decision comes as unwelcome news
as the estimated damages range from $5.15B to $14.17B. We had
believed that the case would be resolved for considerably less. While we
are lowering our price target, we believe APC has a first-rate asset base
and therefore we maintain our BUY rating.
Key points
 Critically, APC/Kerr-McGee found guilty of intent: Plaintiffs claimed
that environmental liabilities were intentionally offloaded onto
Tronox at the time of its spin-off causing it to declare bankruptcy.
The judge ruled that was indeed the case.
 Damages exceed what the market had discounted: We had said that
APC’s shares were being discounted ~$5/share to reflect the
possibility of a negative Tronox outcome. The given range of
damages equates to $10-$28/share. While this is not as large as the
$25B (or $50/sh) that the plaintiffs sought, it is materially above
what we believed the Street had been factoring in.
 Final damage amount still TBD; APC can appeal: The defendants
will be allowed the opportunity to argue whether some amount of
the damages can be offset, hence the $9B range of estimates. We
would expect APC to appeal the ruling in any case.
We value APC using a 20% discounted NAV and a multiple of
EV/EBITDA. We are lowering our NAV by $19/share to reflect the
midpoint of the expected damages range. Also, we are now assigning a
4.5x EV/EBITDA multi

lululemon athletica inc. Update

I can’t resist the temptation to make an issue of the pants or the stock being the butt of jokes in poor taste.

LULU : NASDAQ : US$60.39
Target: US$82.00

lululemon athletica Inc. is a designer and retailer of
technical athletic apparel operating owned retail stores
primarily in North America and Australia. The company
offers a range of performance apparel and accessories
for women, men and female youth. Its apparel
assortment, including items such as fitness pants, shorts,
tops and jackets, is designed for healthy lifestyle
activities like yoga, running and general fitness.

Consumer & Retail — Footwear and Apparel
Investment recommendation
Despite a solid Q3 report (45c vs. our 41c estimate), LULU guided to a
highly disappointing flat Q4 comp implying a 1300bp two year
deceleration from Q3. Traffic issues (2/3) coupled with continued
product delivery delays (1/3) were the culprits. We surmise that
generally poor mall traffic (-5% in Nov. and -10% in Dec. thus far),
exacerbated by the poor comments by founder Chip Wilson, is at play
rather than competition taking share from LULU as Q4 comp guidance
with e-commerce would have been a strong +8%. We continue to view
LULU as a premier athletic retailer whose current setbacks, while
frustrating, are transitory. That said, the stock is likely to tread water in
the near term until the next catalyst (ICR) and/or Q4 earnings in March.
While LULU’s growth potential remains vast, it must begin to show
progress on the investments it is making or risk alienating more of its
customers. 2014 should be that year of improvement, and thus we
maintain our BUY.
Investment highlights
 We lowered our 2014 EPS estimate by 28c to $2.35 (20% EPS
growth) largely driven by a reduced comp outlook to 6.4% from
14.7% previously. Our new estimates assume no improvement in
the business (either in traffic or supply chain), an assumption we
view as highly conservative given our belief that none of LULU’s
current issues are systemic or competitively driven.
Our $82 target (from $90) is based on 35x 2014E EPS/20x EBITDA/DCF.

Bankers Petroleum Ltd

BNK : TSX : C$4.04
Target: C$6.00

Bankers’ operations are focused on developing heavy oil
assets in Albania, which include rights to develop the
Patos-Marinza and Kucova heavy oil fields (both 100%
interest) during the 25-year licence period. Bankers has
an opportunity to unlock immense potential from its 7.7
billion barrels oil-in-place Patos-Marinza field by applying
modern techniques to optimize recovery factors, expand
its resource base, and increase production.
All amounts in US$ unless otherwise noted.

Energy — Oil and Gas, Exploration and Production
Investment recommendation
Bankers Petroleum announced its 2014 budget, projecting capital
expenditures of $313 million and production growth of 10-15% over
2013. The budget reflects a 27% increase over the 2013E program and
is the largest in the company’s history. Approximately 90% of the budget
will be directed toward development work, while the remainder is
earmarked for enhanced recovery initiatives and new ventures like
horizontal wells at Kuçova and 3D seismic on Block F. We have revised
our estimates to reflect updated guidance, resulting in a 2014E NAV of
C$7.05 (from C$7.15). With numerous cost-cutting initiatives planned
for the coming year, we believe 2014E operating funds could surprise to
the upside (although we have not yet incorporated a reduction in
operating costs). With a 12-month target price of C$6.00/share and a
potential return to target of 47%, we reiterate our BUY recommendation.
Investment highlights
 The company has doubled its budget for enhanced recovery
initiatives, which if successful, should generate lower decline rates
and a higher overall recovery factor.
 We expect that operating funds will outpace capital expenditures by
~10% based on a 2014 Brent price of $104/bbl. At $100/bbl, we
forecast a balanced budget.
We use a DCF model to value Bankers. Based on our 2014E estimates
Bankers is trading at a multiple of 0.57x our risked NAV, 2.9x EV/DACF
and $46,840 per flowing barrel. This is significantly below the domestic
junior averages of 0.8x NAV, 5.6x EV/DACF, and $73,200 per flowing
barrel, despite Bankers’ better-than-average netbacks and favourable
debt levels. With a 12-month target of C$6.00 and a potential return of
49%, we reiterate our BUY recommendation.