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7/27/22 Capitalist Times Live Chat
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Victor
5:34
I still have a small position on ET. Is this dead money?
AvatarRoger Conrad
5:34
I don't think so Victor. As I've noted several times in this chat and previously, it's likely we won't see large North American midstream stocks revisit their previous cycle highs (2014) until oil and gas volumes start to approximate levels reached in prior cycles. And that's not going to happen so long as producers (and midstreams) are devoting their free cash flow to strengthening balance sheets, making tuck-in acquisitions and returning it to shareholders as stock buybacks and dividends. On the other hand, ET just increased its dividend by 15% this week (51% more than 12 months ago) ahead of Q2 results and guidance on August 3. That's a pretty good sign it's well on its way to restoring the pre-pandemic payout of 30.5 cents, and business is good despite tepid volumes. All 18 research houses tracked by Bloomberg Intelligence rate shares a buy. I think we just have to be patient and collect the now 8.4% dividend.
Victor
5:37
What it your opinion on TRGP?
AvatarRoger Conrad
5:37
We track Targa Resources in our MLPs and Midstream table on the EIA website. It's a hold in advance of Q2 results scheduled for August 4. The company appears to have adapted to the current volumes environment and is steadily restoring its dividend to pre-pandemic rates. But we think you're better off going with something paying a higher yield--of which are there many options.
Victor
5:40
I'm not sure if any of you guys commented on these two DVN and COP. Your thoughts. Thanks.
AvatarElliott Gue
5:40
COP remains a favorite name. The stock doesn't have XOM's production growth profile but it has a super-low breakeven cost of production and a sustainable dividend. DVN is generally a good company though we just prefer other similar E&Ps like EOG, PXD and CHK in the model portfolio.
Jimmy
5:42
Roger:  Do you expect Vistra to profit substantially from the Texas heat wave in progress?
AvatarRoger Conrad
5:42
Hi Jimmy. I think they are despite price hedges they have--and I believe we'll see evidence in Q2 results and especially guidance on August 5. I will have more analysis in the August CUI issue. The real appeal of this company, however, is the free cash flow guidance it's issued long-term--which it intends to use to buy back stock, raise dividends and cut debt. That's based on cost cutting, so is well within management's control to execute--as well as plans to deploy energy storage in the US. My view has been that this company is steeply undervalued at 10.3X expected next 12 months earnings. And I expect either the share price to rise to a higher valuation or management to follow through on an LBO. Either way I like Vistra as a buy up to 28.
Jimmy
5:48
What is happening with CEG in the aftermarket?  Up a lot.
AvatarRoger Conrad
5:48
There are many reasons why stocks might get a lift in the aftermarket, where trading is typically thin and moves can be dramatic if the buy order is large enough--even a stock as large as Constellation Energy (NYSE: CEG). What we do know is they don't announce earnings and update guidance until August 4. There was an announcement today from management that the company is on track to achieve 95% carbon-free electricity by 2030 and 100% by 2040, as well as provide 100% of business customers with customized data to reduce carbon footprints--and presumably improve efficiency and cut costs. But that seems an unlikely catalyst.
I do see that the stock has started trading with natural gas prices to some extent--since gas still sets the price of wholesale electricity where Constellation operates. But at this point, I think we're going to have to wait until tomorrow to see if this move means anything--though I'm always happy with upside.
AvatarRoger Conrad
5:54
Well that looks like everything we have in the queue as well as the voluminous emails we received prior to the chat. We really thank everyone who participated today. If for some reason anyone feels like we didn't fully answer their question--or possibly overlooked it--please drop us a line at service@capitalisttimes.com and we'll get back to you as soon as we can.
5:56
As I said at the outset, we will be putting together a complete transcript of all the Q&A shortly. And we'll be sending a link to everyone when it's ready. The pdf will also be posted on our websites as always.
Have a great evening everyone!
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