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9/30/26 Capitalist Times Live Chat

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Elliott Gue

2:21

Natural gas is out of favor right now and most of the stocks leveraged to gas, including VG and EXE, have been weak lately, particularly relative to more oil-focused names. There are a number of reasons for that, but I suspect the biggest is the El Nino issue, which I covered at more length in my weekly video on Sunday . The executive summary is that in strong El Nino events, we tend to see warmer winters and that's bearish for gas prices. In my view, however, with speculative shorts in gas so elevated right now and with El Nino old news (we've been tracking it for 6 months) we're likely to see a turn in sentiment on gas-related stocks this year. The main driver would be that stock investors start to look through winter weather towards the 2+ bcf/day surge in LNG exports over the next year and increased gas demand for electricity generation.

Brian O.

2:22

Hi Roger
We love these Chat sessions with you and Elliot.
AQN, CWEN and BEPC - have you changed your opinion on these three stocks?

Roger Conrad

2:22

Hi Brian. No I have not. They've dropped a bit this fall. But all indications are that all three are on track to meet or beat current 2026 guidance. Brookfield also has a major potential upside catalyst from a partial spinoff/IPO of US nuclear power champion Westinghouse.

We'll get a chance to see these companies prove themselves when they release earnings in late October/early November.

Guest

2:25

FYI. I see your comments on Slate - I believe they just agreed to be acquired by Brixmore and Everview.

Roger Conrad

2:25

Can't help thinking they flushed out a number of retail investors by announcing the dividend suspension first, no? Doesn't really pass the smell test with me.

Christopher B

2:30

Hello Roger Conrad
Can you update JinkoSolar Holding Co., Ltd. (JKS) ?

I am long-term investor and I believe Solar is valuable way to produce Electric energy and that as technology improves JinkoSolar will benefit

Roger Conrad

2:30

Hi Christopher. JinkoSolar will be changing its name to Jinko Holdings this month, with the same NYSE symbol JKS.

It's the largest solar manufacturer in the world and arguably has the most advanced panels. It is facing several major headwinds at the moment--oversupply as China's solar manufacturing base slowly rationalizes is probably the biggest. And it's weighed on prices and margins. The company is also affected by US protectionist policies, though it does have manufacturing here. And I think there's a discount in the share price because of concern it may be delisted as a US company.

I do think this company has a very long and bright future. Its global market position is strong. But it's going to take patience for investors to get there.

das555

2:33

It seems like the utility sector has undergone rather extreme selling with the rise in 10 year treasuries and the fear of slowing AI center growth. I know it is hard to call the bottom but it does seem like with new 52 week lows we are near such a bottom and it might be a reasonable time to leg into the utility space perhaps via XLU or UTSL. Your thoughts?

Roger Conrad

2:33

So long as you realize what you're buying with these ETFs. XLU, for example, is 12.74% NextEra Energy, 7.66% Southern and 7.15% Duke Energy. I like all three. But I'd rather own them straight up. And UTSL is a complicated animal with about 30% not actually in utility stocks but a variety of derivatives included to juice returns.

I do agree it's a good time to add to positions in high quality utility stocks.

Frank

2:34

In your issue released today you said that the US will have to purchase more heavy sour crude from Canada and Venezuela. In Canada you have OVV, CVE, SU and CNQ. I know you have OVV in the portfolio but which of these others could see the most benefit from increased heavy crude purchases?

Elliott Gue

2:34

All Canadian oil sands producers will benefit. Historically, 70%+ of US imports of Canadian crude come in to PADD II (Midwest -- Illinois, Indiana, etc) where there are refineries that are essentially purpose-built to process Canadian crude. The US is a logical end-market due to its proximity (pipeline exports directly into PADD II) as well as the fact that processing this oil requires access to abundant supplies of hydrogen, which is derived from natural gas (US natgas is the cheapest in th world by a huge margin). Also, not as often talked about, processing Canadian crude to load on a pipeline requires condensate (basically a very light hydrocarbon) and the US exports condensate to Canada to facilitate the flow of oil back south. The problem for Canadian producers is that if there's a disruption at one of the US refineries, a heavy maintenance schedule, etc then spreads blow out with Canadian oil trading at a huge discount. One of the core lessons of economics and trade is that you do NOT want

Elliott Gue

2:34

to have a single supplier for commodities OR a single export market. That leaves you very exposed. So, finally, we are seeing Canada open up pipeline roots to Pacific tidewater -- basically pipelines west to the British Columbia coast, which allows oil sands to be marketed to Asian buyers. It's not a total solution because transportation costs are higher to the BC coast, as are tanker rates from the BC coast to Asia, but at least it provides a floor for pricing and a level of operational certainty that did not exist before. The US is seeing more Venezuelan imports into PADD III (Gulf Coast) but you'll need Canada to PADD II and VZ to PADD III both I suspect.

2:36

I covered the US-Canada energy relationship in a bit more detail here in this video:

Mike C

2:39

Do you see any investment implications to the Trump/Canada tariff war vis-à-vis pipelines or Canadian holdings across your services?

Roger Conrad

2:39

Hi Mike. At this point, it looks like the Canadian energy sector is going to avoid the worst of the US/Canada trade tit for tat--just as it did last year when the trade war was first declared.

It's certainly possible governments will take actions that negatively impact cross border energy flows, or even Canadian companies operating in the US. But at this point, the two most potentially affected--TC Energy and Enbridge--appear to be pursuing opportunity in the US unimpeded. Pembina operates almost wholly in Canada.

US/Canada tensions are of course a major reason the Canadian government is now backing Alberta's push to export oil, LNG and NGLs--rather than restricting it. And that's a big plus for all of these companies.

Mike C

2:40

I’m having a senior moment regarding a couple of trades in CT-T. Did I miss sell alerts for MLCO and Z? (Are these still open trades, or should I look at them as tax-loss candidates for this year? Both are profoundly under water with horrible charts.) Many thanks!

Elliott Gue

2:40

Yes, we still have small positions in both left in the portfolio and both are down. We have been looking for a bounce back into overhead resistance as an opportunity to sell . We would probably look to sell as a tax loss before the end of the year, especially if we end up booking gains on names like ABCL and HBM.

Denisimo

2:40

Just read today's E & I Advisor. Great one I would say. And thanks for releasing it prior to the chat. I like the new (?) column regarding Midstream K-1s at tax time. But I think there may be an error. I believe PAGP no longer issues them. I did sell some last year in an IRA with no UBTI consequences.

Roger Conrad

2:40

Thanks Denisimo. I will check that.

Ben F.

2:45

Good morning Roger and Team - Thoughts on Whitehawk (WHK)?

Roger Conrad

2:45

Hi Ben. The royalty companies should do well as the energy upcycle continues. And it's always a good sign when one of them adds high quality acreage as Whitehawk Minerals did this month in the Marcellus, Utica and Haynesville. It is relatively new. And we generally prefer to recommend companies with a longer history as BSM, DMLP and VNOM do in the royalty space.

David L.

2:47

“Why don’t U.S. refiners make more investments to refine locally produced light and ultra-light crude rather than rely on importing heavier crude that is subject to higher transportation costs and geopolitical risks?” Thanks

Elliott Gue

2:47

The first step of the refining process is atmospheric distillation -- basically just heating up the oil in a tower where shorter chains of hydrocarbons ("lighter ends") will move to the top of the tower while heavier products will remain near the bottom. If you load light or ultra-light oil in an atmospheric distillation tower, you're going to get a huge yield of the lightest products and almost no middle distillates (like diesel). Middle distillates are a crucial (maybe THE crucial) product in the US and world wide and you just can't produce enough of these products with those very high API oil grades. Moreover, since most US oil production is light AND sweet, this also means you wouldn't have access to sulfur supply, which is a key industrial commodity used in things like the production of fertilizer. You can physically transform natural gas or ultra-light crude into heavier products, but the processes are prohibitively expensive even at scale. In contrast, on the other end of the spectrum, very few global

Roger Conrad

2:47

Hi David. I would say NIMBY is one reason we haven't seen more refining capacity in the US--and why even some existing facilities are very likely in danger of being shut down in the next decade. It's just a lot easier to build elsewhere--which is one reason we have a shortage.

Elliott Gue

2:48

refiners have the capacity to refine heavy and heavy sour crudes at scale like the US does. So, there's a logical trade here -- UIS exports light, sweet oils in high demand outside the US and backfills heavy, sour crude for blending from Canada and Lating America.

Mike C

2:52

Good afternoon gentlemen and Sherry – thanks for holding these chats. They’re every bit as valuable as any of your publications.
Wondering if you have any insights into the 7% spike last week in the SOFR, and does this signal liquidity concerns that might spill into the market?

Elliott Gue

2:52

Thanks for joining us. The secured overnight financing rate (SOFR) has actually been pretty well-behaved this year -- it's around 3.88% or 3.90% lately, right in the midpoint of the Fed's target range of 375 - 400. It does rise when the Fed hikes rates, so you will see that it shifted up from 3.62% on the 16th to 3.85% on the 17th of this month.

Roger Conrad

2:53

Adding to my answer to Denisimo--I see what the confusion is. Basically, we have Plains All America Pipeline (NYSE: PAA) and Plains GP Holdings (NYSE: PAGP) listed as one company.

2:54

As a business, they very much are. Plains GP Holdings' only asset is shares of PAA. And the dividend is the same. But PAGP does not offer a K-1 while PAA does. With PAGP you get a 1099.

Denisimo

3:12

Thanks. Maybe an appropriate time to ask you to again compare investing in PAA or PAGP. Ignoring the K-1 issue.

Roger Conrad

3:12

We've had a buy below target of $26.50 per share for both PAA and PAGP for some time. Prices of both have come down a bit this fall. I don't think it has anything really to do with business fundamentals--Plains is likely to report a very solid Q3, with reduced debt and solid volumes from its growing Permian Basin system.

That's not to say the share price won't retreat if oil and gas prices do further. But I'm comfortable holding both of them at this price. PAGP is trading at a slightly premium to PAA--almost certainly because it does not require filing a K-1. I would favor PAA though at this time if you're not really averse to K-1s--it's a cheaper way to own the same assets and there are tax advantages as well.

Guest

3:23

Hi. Thanks for the conversation. I'm trying to wrap my head around the impact of high interest rates on utilities. Beyond the knee jerk selling reaction which may be unfounded, I'm wondering if there is maybe some real cause for concern. Up until recently, interest rates were on a 40 year decline and inflation reasonably contained. This made financing capex incrementally cheaper and utilities could actually lower customer bills along the way. All of this has been reversed recently. Doesn't this potentially at least warrant a little consideration of how this might put a cap on utility stock performance, not just for the last couple months, but maybe longer term? And as a followup, utilities have been jettisoning their unregulated businesses for a while - are they perhaps doing this at just the worst time, given that they are increasingly at the whim of politically-sensitive regulators? Are the Vistra's of the world any less hurt by the dynamic described above?

Roger Conrad

3:23

Good questions. To date, there's been little or no evidence in actual numbers or management guidance that rising interest rates are having a negative impact on earnings or CAPEX-based growth forecasts. That's after about four years of higher for longer interest rates/borrowing costs.

Debt is obviously a concern for management. And we've seen many companies slow dividend growth rates to bring down payout ratios and allow more self-funding. But so far, utilities have adapted well to higher for longer interest rates since 2022.

I can imagine a scenario when interest rates rise fast and far enough where regulators under political duress step in to restrict CAPEX. In fact, that's already taken place in several states. And this is why it's so critical to watch regulatory environments. But for the first time in 50 years, demand is rising. And at the same time, storms as well as wildfires have gotten worse and the public's tolerance for outages less. So there's only so much restricting they can do.

Roger Conrad

3:24

Anyway, this kind of analysis is very much a part of what I do at Conrad's Utility Investor. And you can see a synopsis of my research in the Utility Report Card that comes with every issue.

3:28

Also a good question about Vistra and unregulated versus regulated businesses in general. My main comment would be there's no one size fits all. NextEra's unregulated energy related businesses are thriving. But it was probably a good idea of Hawaiian Electric to get out of the banking business--even if wildfire costs hadn't forced them to. I think Vistra has a solid business and it's why I've recommended the stock for more aggressive investors. But it's earnings are far more volatile than a regulated utility's And keep in mind that most regulatory environments now in the states are still quite positive--we're not yet at a crisis point by any stretch. But you have to look state by state and company by company. One size doesn't fit all.

Jimmy

3:35

Hoping to hear some discussion of VST. Analysts targets seem out of range with stock trending down regularly. Comments, please

Roger Conrad

3:35

If there were an award for least valuable indicator of future stock price performance, my vote would be analysts' 12-month price targets. They notoriously are reduced after stocks come down, and are raised when they're in an uptrend.

I do think Vistra came to be viewed as an AI stock. And the backlash to data centers combined with doubts about AI future revenue generation has taken a toll on the share price.

On the other hand, this is also a very well managed company that operates high quality power plants in markets that need them. We're going to see strong cash flows when the company reports Q3 results in early November. And unlike earlier this year when VST was actually above my profit taking price, shares are actually cheap based on recurring earnings.

Frank

3:42

In CUI you cover some renewables, but EIA is absent coverage of any of dividend payers (CWEN, BEP, HASI, come to mind). Any reason why EIA only covers the hydrocarbon molecule?

Roger Conrad

3:42

I would say the main reason is focus. EIA covers--with buy/hold/sell advice, safety ratings and other data--40 plus MLPs and midstream companies, 40 plus Canadian and Australian companies and 40 or so exploration and production and services companies. Conrad's Utility Investor covers 160 plus names--and renewable energy like the utilities we track there are focused on electricity.

That's a lot to put in one publication. We do sometimes have special offers for readers who want both EIA and CUI. If you're interested, call Sherry at 877-302-0749, M-F, 9-5 ET.

Bill

3:48

Could you please comment on the OPUC decision concerning POR's conversion to a holding company?

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