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9/25/25 Capitalist Times Live Chat

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JT

2:33

Hi Elliott, oil services stocks are finally showing some signs of life. HAL and OIH broke out of a 6-month range and above their 200 MA. BKR is back at yearly highs. But something is wrong with SLB as it still down in the dumps and cannot move out of its 6-month range and under the 200 MA. What are your thoughts on oil services and SLB?

Elliott Gue

2:33

Generally, I see the oil services names as a little "sold out." They've been out of favor for a while now and the last Bank of America Global Fund Manager Survey shows active managers almost 2 standard deviations underweight energy stocks relative to the past year of history. As we pointed out in yesterday's issue, the big banks are all uniformly convinced Brent is headed for $50 or worse. This is the sort of bearish sentiment one sees near lows for the group, NOT ahead of major sell-offs. Simply put, I think the group is broadly pricing a really bad scenario, leaving little room for disappointment relative to upside.

I have noticed the technical breakouts in a long list of these names. Indeed, one of the screens I regularly due to identify stocks that are unusually quiet in terms of trading ranges flagged a bunch of these earlier in the month.

Drilling down into the specifics, BKR has been our favorite services name since late last year consistent with our "Year of Gas" theme.

Elliott Gue

2:34

Of course, that theme took a nasty "breather" over the summer and we saw a lot of the gas producers pull back sharply based on the front-month price of gas and cool summer weather. To a lesser extent we saw that with BKR, which struggled to rally until their (solid) EPS release in late July. As we've been saying, we think that was a buying opportunity as the outlook for gas into early 2026 remains solid -- a lot of our favorites like EXE/EQT have been jumping this month. In my Options service, we jumped back into calls on CRK as well last week. So, I think BKR is part and parcel of that move as is Venture Global (VG). Looking at HAL and SLB, the former is the go to name for fund managers looking for North America (NAM) exposure. So, I think what you're seeing is that it's moving first as NAM is short cycle and turns first. Fundamentally, we still prefer SLB over HAL. That IEA report referenced in yesterdays issue featuring a major upward revision to the global oil base decline rate is bullish for services.

Susan P.

2:40

FYI, a lot of focus was given to cryptocurrency mining's energy-related demand and impact on grid stability. Any thoughts on cryptocurrency in general, let alone its impact on electricity supply/demand? (Lacking enough understanding, anything related to bitcoin, etc. has not appealed. But, I may need to change?) Thanks to both of you,

Roger Conrad

2:40

Crypto currency is a driver of demand growth for electricity, particularly in certain parts of the country where it's become a significant portion of the load. So is electric vehicle adoption. The pace will probably be slower without the tax credits. But people were buying Teslas long before 2023 when they kicked in. So is re-shoring or re-industrialization--as the modern factory now runs far more on electricity than human labor. And those are all reasons why demand growth for electricity is happening rapidly and in real time.

Our general take on crypto as an investment is that it has no intrinsic or underlying value--it's worth whatever people are willing to buy it for. That's of course true for any investment. But unlike gold--crypto is not solid.

That doesn't mean the price can't go up and that people can't make money in crypto. But gold is proving itself the superior inflation hedge by far--right before our eyes.

Mister G.

2:46

Any new insight on AES and XIFR (old NEP)?

Roger Conrad

2:46

Hi Mr. G. it looks like AES management isn't interested in the current takeover offers from private capital. That makes sense to me as the stock sells for 10 times trailing earnings and guidance is for 7-9% growth. Like I said answering one of our prechat questions, investors are right now skeptical the company can grow that fast in view of the Trump Administration's anti-renewable energy politics. But I think they'll affirm guidance again in early November with Q3 results. And I expect another dividend boost in December.

XPLR will report Q3 results and update guidance when its parent NextEra Energy does in late October. Their recovery plan depends basically on executing from within. And while there hasn't been any real news in recent weeks, I don't see any signs they won't report progress then.

Arthur H.

2:47

Gentlemen,

Please discuss Real and Lemonade. Should we bail on LMDE? Thoughts on LYB for the long term.

Thank you.

Elliott Gue

2:47

Both REAL and LMND are recommendations in our trading service, CT Trader. Earlier this week, we recommended booking half the gain in REAL (about 30%) since recommendation on Sept. 8th and we still recommend holding the second half.

The reason we booked half that gain is that when a stock runs up as Quickly as REAL did in 2 weeks, and runs up into resistance (around $11.00 to $11.50 on REAL) the probability of a short term pullback is high. Today it's finding some support and we still believe it could ultimately break that resistance above $11 and rally towards longer-term resistance at $17+. That's what we're looking for but we probably won't, in any case, hold through their next EPS release in early November. The massive short interest in REAL makes it prone to short squeeze melt-ups.

LMND is basically an insurance company that uses artificial intelligence (AI) as a core part of their business model. It's not a fundamental pick, basically a small cap name with an AI angle that's seen a lot of upside

Elliott Gue

2:47

momentum of late (much like REAL). Also like REAL LMND has hefty short interest. So, it's down since recommendation earlier this week, which we see as a function of the broader market pullback. However, as I wrote about over on my Free Market Speculator Substack today, I think we're seeing the beginnings of a significant rotation into small caps . So I am looking for a renewed spike in LMND ahead of their earnings in early November. The stock is digging in a bit this afternoon -- that needs to continue or we'll probably bail and take the loss. Note that we have been booking some gains in CT Trader the last few weeks -- including some REAL and HBM this week and NMRK back in late August for the reason that we saw elevated risk of at least some minor profit-taking.

Shellco

2:54

Hi Elliot and Roger,

What is your take on Everus and Knife River? They both doubled since the spin offs. Is there enough upside to hold on, or is it time to walk away with a nice profit. Also, I have held Essential Properties (EPRT) since it's IPO. It has more than doubled since the IPO, but it seems to have lost traction lately. Any comments you have on this stock would be appreciated.
Thanks for all your good advice.

Roger Conrad

2:54

Thank you for joining us today. Both of these former pieces of MDU Resources (NYSE: MDU) are strong companies. Construction services firm Everus actually raised its 2025 guidance after reporting 35.5% higher earnings per share and a 23.9% year over year rise in backlog.

Construction materials company Knife River has greater exposure to commodity prices and combined with the impact of unfavorable weather on production, their results have slumped a bit in 2025 from 2024's robust levels. But they are nonetheless proving they can remain profitable under tougher conditions. And backlog was at a record at the end of Q2. They cut 2025 guidance but maintained long-term projected 20% annualized EBITDA growth.

I think these are both solid long-term holdings but only for investors who don't need a dividend. Note that former parent MDU has speeded up dividend growth since the spinoffs--a 7.7% boost last month.

Hans

2:56

Elliott, In your latest issue of EIA you mentioned the different refiners, however there was no mention of OVV any update

Elliott Gue

2:56

The article was about the refiners and the tanker names, while OVV is a producer so that's why it wasn't covered there. We did mention in it the August issue where we reviewed Q2 earnings for the coverage universe and on our longer piece on buying opportunities in gas back in July.

OVV is benefiting to some extent from the resurgence in the gas theme given the company's sizable gas production. That said, of course, OVV is still a mixed producer with oil,NGLs and gas so it's not going to see as much a direct lift as a gas-focused stock like EXE/EQT.

We continue to believe OVV is not getting enough credit for its Montney position that's benefiting from the start of of the Canada LNG export facility. We still like the name.

Roger Conrad

3:00

As for Essential Properties, I track it in the REIT Sheet. Its price has slumped along with other residential REITs this year--largely on concerns about temporary oversupply of apartments in certain markets and now perhaps some anticipate mortgage rates will decline. But Q2 results were solid (6% higher core FFO per share). And the REIT continues to drive growth by investing conservatively. The yield of over 4% is solid, growing twice a year and well covered. I think it's a buy a couple points lower from here.

Lorraine G.

3:11

Hi Roger,

Thank you for your advice over the years. You have probably answered this question before, but I'm wondering if AMLP might be a good alternative to holding individual MLPs such as EPD and ET. I have accumulated several shares of EPD in and out of retirement accounts. AMLP would eliminate the K1 issue, but maybe more importantly be better suited for retirement accounts. Apparently if the UBTI (unrelated business taxable income) is over $1000 in a retirement account each year, then you have to file another tax form (990?) and pay some tax. Schwab always sends a note saying no UBTI is due, so I am not sure what the threshold might be for owing the tax or how much the tax might actually be.

Thank you

Roger Conrad

3:11

Hi Lorraine. For all practical purposes, it's very difficult to accumulate $1,000 of UBTI unless you literally hold tens of thousands of MLP units--and then only if you own MLPs that operate outside their core businesses. Enterprise, for example, has actually had negative UBTI some years. So I think it's highly unlikely your holdings of ET and EPD would generate anything close to the level needed to trigger an additional filing in your IRA--in fact, the K-1s are not something you'd need to deal with, interesting information but within an IRA not needed to file your taxes.

As for the question of whether AMLP is a good alternative to owning individual MLPs, you first need to know what's insider: The ETF has roughly 13% in Plains, Western Midstream, MPLX, Energy Transfer and Enterprise Products Partners. Sunoco LP is 11.5%, Hess Midstream is at a little under 10%, Cheniere 5% and USA Compression 4%.

The EIA portfolio is well represented. So are some MLPs we're less high on. We prefer to control what we own.

Bill G.

3:14

Hi Elliott / Roger: Is this a good time to buy some shares of EQT?
Thank you

Elliott Gue

3:14

IT's been our view that the sell-off in front gas over the summer that catalyzed significant sell-offs in the US gas producers was overdone.

The past month or so we've seen that play out with names like EQT and EXE finding a low and, the past week or so, breaking higher again. Our two favorites are EQT and EXE so we regard those both as good buys here.

I mentioned CRK earlier on in today's chat; however, that's more of a short term trade we have in our CT Trader and Options services -- it's less appropriate for long-term holders.

Hans

3:17

Roger, Abeline TX AI complex who supplies the energy and is there a possible way to produce a list of the energy companies that benefit the most of the AI energy demand

Roger Conrad

3:17

Hi Hans. The biggest power providers to data centers are regulated utilities. Entergy Corp (NYSE: ETR), for example, is guiding to 12-13% industrial demand growth the next five years. And Dominion Energy (NYSE: D) serves northern Virginia, which is the epicenter of data centers in the US and the place where most new construction is taking place. Sempra Energy and Centerpoint in Texas are also seeing massive investment opportunity from servicing data centers in their territories.

The leading non-utility producers now winning contracts for data centers' business are AES, Brookfield, Constellation Energy and NextEra Energy.

I've written a great deal on data centers/AI and electricity demand plays in Conrad's Utility Investor. Look for more in an upcoming issue.

Hans

3:19

Elliott, In the next issue of CT Trader (Swing and Commodities) is there a way to include the total portfolios to see which stocks are in each one. Thanks

Elliott Gue

3:19

I'll make a note to do a more detailed portfolio rundown/review over the next week or two. We do include a list of our top "Fresh Money" buys and recent sales/recommendations as a bulleted list at the top of every issue. We do that because when we have new members come in to the service we want to avoid a situation where they enter trades we no longer see as appropriate for new money (either because our view has changed or the name has already made its move). Also, we will happily answer any questions about specific trades, and our most current advice, via e-mail or these chats as well.

Dan N

3:22

Hi Roger - what do you think of Rio Tinto's recent acquisition and moves to build a major lithium division?

Roger Conrad

3:22

Hi Dan. It's a pretty clear sign the big players in the global extraction business see a massive opportunity for lithium ion batteries going forward. New mines are extremely expensive and take years to build--so when a company like Rio does something like this, it's making a major, multi-year commitment based on hardnosed analysis.

ExxonMobil has also made a major investment in lithium production in the US--which fits with its recently published 2050 Outlook. This is in addition to a huge planned investment in new oil and gas production going forward. it's an all of the above world for energy. And well run companies are setting up to prosper.

Dan N

3:30

Also related to lithium and mining, do you know why LYSCF is going up so dramatically? Is there a rumored buy out? Is it strictly lithium and rare earth metals being a positive? The company is Australian and Malaysian but has something going on in Texas.

Roger Conrad

3:30

Another driver of these lithium and other metals projects is to diversify supply chains back to the US, in an era where governments are throwing up barriers to trade. I think Lynas has caught some hype from one of those projects, as well as the extended tax credits for battery storage projects in the US under the federal budget law, which we've been calling OB3.

Unlike many of the names that get publicity in this space, Lynas does have actual production and earnings. Those are heavily impacted by selling prices. And the more lithium that gets mined, the less likely we'll see pricing spikes. So it's speculative. And anyone who buys in at this point will be doing so after almost a triple this year.

Tommy

3:34

Good afternoon Roger, You recommended swapping BCE for TU earlier this year. TU has had a sluggish performance in recent times. Any further thoughts on this investment?

Roger Conrad

3:34

Hi Tommy. I still think that was a good move. Telus has a year to date return of a little over 22% and has increased guidance once and its already generous dividend twice. Telecoms don't typically make major moves. And at this time, Canadian regulation is perceived as less than positive for investment. But this company is coping, while continuing to build out its 5G and fiber network in western Canada, which is the most economically dynamic region of the country. BCE by contrast has cut its dividend by half and is up 5% for the year--most of that because of a slightly higher Canadian dollar.

Dan N

3:43

Hi Roger - thoughts on the recent EIX settlement over 2017-18 wildfires and mudslides? Does $2B in recovery amount to new, real cash available to deploy, or is this bookkeeping that changes little? I was surprised to see so little stock price reaction.

Roger Conrad

3:43

Hi Dan. This is real money for Edison, though they do not expect to receive the full $2 bil ($1.6 bil in uninsured claims plus $400 mil for legal costs) until "the end of 2026." And they still need CPUC approval.

The recovery is 43% of what they had filed for. But frankly I think this is about as good as the company was going to get and there's no reason to doubt management's statement that "we believe this is a fair settlement." And it at last closes the book on 2017-18 costs that have hung over the company ever since.

It's fair to ask why big investors didn't respond more positively to the news. I believe it was expected to some extent. But more important, this is not a settlement of potential liability for this year's Eaton Fire. Investigation is still ongoing and lawsuits against the company are already in billions.

As I've said, Edison shareholders are only liable for roughly $4 bil, an amount already reflected in the share price then some. And they'll only owe that if

Roger Conrad

3:45

Continuing Dan's question on Edison: They'll only owe if (1) Causality is shown for the fire from Edison equipment (not a sure thing) and (2) the utility is shown to be negligent, which is a much more difficult proof. Otherwise, all damages are covered by the California Wildfire Insurance Fund, which had $24 bil in it roughly before the state passed legislation that boosted it by 50%.

3:46

I think that's pretty good protection for Edison. But the stock is going to keep trading on a worst case scenario until there's clarity. Shareholders are going to have to be patient.

Elliott Gue

3:46

One Question from my e-mail:
Hi Elliott,
Somehow, with my energy investments, I have not played it well this year.... After Trump's election, with "drill baby drill", I stayed away from the energy producers, and invested instead in the pipeline companies, thinking that with low energy prices and Trump's desire to export more energy, they would do well.... And they did well up until the April swoon, but have not recovered very much since.. And recently HESS Midstream took a hit as its guidance going forward was at the low end of its estimated range....
What do you feel is the future of our recommended pipeline companies in terms of price appreciation? Although they are giving a nice return, it's a little disappointing seeing the return people have gotten with technology stocks and the major averages. And what do you think is the cause of HESS MIdstream's disappointing guidance?

Answer:
Thanks for the question. As you know, I was never a believer in the “Drill Baby Drill” narrative.
In the short to intermediate-term, US oil and gas producers base their drill or no drill decisions on commodity prices not who is in the White House. So, this year oil prices have been relatively weak and gas prices have been relatively strong – we’ve seen an uptick in drilling activity in some gas basins but rigs are coming out on the oil side.
HESM, for example, cut its guidance because Chevron is reducing their rig count in the Bakken from 4 to 3. CVX’s decision is almost certainly based on oil price weakness not any deterioration in the quality of that Bakken acreage. That means less volumes moving through the HESM system than previously expected.
As Roger noted earlier on in the chat, HESM is (finally) back below our buy under price and we do see it as a buy now.

3:47

Longer term, we (continue) to believe that oil prices will be much higher and, accordingly, drilling activity and midstream volumes driven by oil (this includes associate gas/NGls) will be a growth tailwind.
Now, what the Trump administration can do, and has done, is dial down the anti-oil and anti-gas rhetoric and try to cut through some of the regulatory red tape. For example, he quicky ended the LNG export “pause” implemented by the Biden Administration and we have seen renewed interest in building out LNG export terminals especially late this decade.

We think that benefits the well-placed natgas producers (EXE and EQT which are up nicely since the election last year). It’s also a boon for VG, which has emerged as a leader in the modular LNG train strategy.
However, none of this is bad news for midstream generally. I think you have to remember that the midstream names saw a tremendous wave of outperformance starting in the summer of 2023 and into early 2025. In my view, what you’re seeing is a bit of consolidation and making some profit taking this year that’s healthy as some of the more laggard groups – like the producers – play catch up. I still think we see plenty of upside in midstream as our view remains that oil prices will not stay in the $60’s long-term and gas prices around $4/MMBtu long-term generate volume growth potential.

Alex M.

3:51

Hi Roger. In terms of REITs, what are your thoughts on COLD at this level? The stock has gotten hammered lately and the yield is now over 7%. Opportunity or value trap? Thanks.

Roger Conrad

3:51

Hi Alex. I've added Americold to coverage in the REIT Sheet, starting out as a hold. I will be reexamining it for the issue next month, though I'm reluctant to jump in until we see Q3 results in early November--largely because of the guidance cut in August following weaker Q2 results. At the new range mid-point for FFO per share ($1.42), coverage is still solid (1.54 times). But again, I want to see what they guide to.

Tommy

3:53

What is your latest thinking of PR now that it is several months since you recommended a swap from OXY to PR? Thanks. Sincerely appreciate your monthly chats.

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