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9/24/24 Capitalist Times Live Chat
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AvatarRoger Conrad
6:14
Hi Jim. I think the near-term technology solution the telecom industry has settled on is "convergence"--that is building networks that utilize the best of landline (fiber) and wireless (5G). The 3 leading players in wireless (AT&T, T-Mobile US and Verizon) have basically acquired/run their wireless competitors out of business in the US--and they're now in the process of building/acquiring fiber to eventually run everyone else out of the wireline broadband business. That includes Big Cable--which is losing broadband users and only gaining wireless by reselling Verizon service.

What I think we're setting up for here is 6G the next few years, which these 3 companies will utterly dominate--mainly because no one else will have anywhere close to enough money to deploy it. Just as 3G provided the technical breakthrough that made 4G so profitable, so should 5G do for 6G as the applications catch up.
AvatarRoger Conrad
6:17
By the way, Echostar--owner of DISH Network that many thought would provide a fourth national network--failed to reach an agreement on debt restructuring this week. It claims to be on track to reach 80% of the US by the end of the year--but it also has $2 bil maturing debt in November now yielding a distressed 23.4% to maturity. That's a pretty shaky foundation for competing against the Big 3.
Jim D
6:24
Gentlemen - comments on preference on buying NEE vs NEP for short term.   AND your thoughts on Bank of America analyst comment that Energy is a Bear Market Trap?
AvatarRoger Conrad
6:24
Pounding the table to buy NextEra Energy (NYSE: NEE) the parent after the stock dropped last fall was probably my easiest call of the past year. And since October 6 of last year, it's up over 70%. I think the stock would probably break 100 later this year, if Democrats avoid a Republican sweep in November and investors stop worrying overnight about an IRA repeal. And I think it will get there next year, just by proving its business model doesn't depend on subsidy. But at this point, NEE trades above my highest recommended entry point of 80, so I think fresh money should be patient.

As for NEP, I don't really have anything to add to my answers earlier in the chat. But to summarize, it's still priced for a 50% plus dividend cut--even as the Fed pivot to lower interest rates is making that far less likely. And I think it's a great bet for the more risk tolerant.
AvatarRoger Conrad
6:27
As for energy being a bear market trap, I can't really speak to others' opinions. But as we point out in the upcoming issue of Energy and Income Advisor--which I can reveal will post tomorrow--there are more bets against oil now than there were in 2020 at the height of the pandemic. And as was the case then, we see that as a pretty good indication that oil as well as gas have bottomed.
Victor
6:35
Hello guys, I'm not sure if this was covered. Sorry, I couldn't login earlier. What is your opinion on the COP and MRO merger. I have a position on MRO and it seems that the deal will be completed as shareholders approved it.  Would you advise to get out? Thanks.
AvatarRoger Conrad
6:35
Hi Victor. Marathon shareholders approved the merger with ConocoPhillips by a resounding margin earlier this month. There's still a shareholder suit by Martin Siegel that alleges the offer for MRO is too low. But the only real hurdle to closing now is anti-trust approval by the Federal Trade Commission, which made a "second request" for information in July and has not had anything else to say since.

On the other hand, the FTC is reportedly ready to approve Chevron's proposed acquisition of Hess Corp, a much bigger deal as Hess' market cap is $41 bil plus versus Marathon's $15.4 bil. And that's been the basic pattern of how the FTC has approached energy M&A the past several years--a lot of noise up front and occasionally imposing conditions, but by and large approving what comes before them.

I can't forecast with an accuracy when the FTC will give the go-ahead and this deal will close. But that remains my expectation.
Victor
6:42
Elliott, I've been reading about true shareholder yield. (Dividend Yield + Buyback Yield + Debt Paydown = True Shareholder Yield). Do you use this metric to determine yields of companies? Example, when you compare XOM with CVX?
AvatarRoger Conrad
6:42
Not really anything that mathematical. Obviously all of those things are important to determining a shareholder return. But when it comes to energy companies, so are CAPEX, return on invested capital, production gains, cost per BOE and a number of other metrics. And specifically for super oil majors like Chevron and ExxonMobil, the amount of debt is really not a significant factor for either valuation or financial/operating strength. ExxonMobil, for example, is expected to generate $32 bil in free cash flow this year after industry leading $25 bil CAPEX, or $16 bil after dividends paid. That's enough in one year to retire all debt maturing through 2029. Chevron's $18 bil after $16 bil CAPEX leaves $5 bil--enough to retire all debt though 2026.

Bottom line: I think it's an easy metric to screen stocks. But I'm not sure it really helps our understanding of energy companies.
Victor
6:45
What is you opinion on oil prices? More specifically where do you see USO trading in the short term?
AvatarRoger Conrad
6:45
Hey again Victor. Elliott has written a quite extensive feature piece in the Energy and Income Advisor that will post tomorrow, and as you'll see, we're pretty bullish. If you have more questions about the specifics of oil prices beyond what he's answered in this chat--and expounds on at length in the upcoming EIA--we'll be happy to take them at service@capitalisttimes.com.
Victor
6:48
Hello Elliott, a few months ago you were pretty bullish on VLO. I believe that you had a target of $200 by the end of this year. Do you still feel that way or your outlook has changed? Thanks
AvatarRoger Conrad
6:48
And I'll take your last one here as well. We're still very positive on Valero Energy as a long-term position at a price of 167 or lower. As you may have noticed, we have not been bullish on most refiners. But this company stands out for financial strength, facility location and unmatched scale. And it's proven its worth in cycle after cycle--it remains a core holding, even with the macro picture of a potential slowdown along with higher crude oil input prices.
AvatarRoger Conrad
6:49
Well that appears to be all we have for this month. We'd like to thank everyone for joining us today.
6:51
If for some reason your question was not fully addressed, please drop us a line at service@capitalisttimes.com and we'll get to it as soon as we can. We will also be sending you a link to a transcript of the entire Q&A tomorrow morning. And as always, it will be published on our websites.
Victor
6:51
Thank you guys for this service!
AvatarRoger Conrad
6:51
Thank you Victor.
AvatarRoger Conrad
6:52
Have a great evening everyone. We'll look forward to chatting with your next month--or better seeing you at the Orlando MoneyShow, October 17-18. All the best.
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