JotCast | May 2025 Capitalist Times Live Chat | 5/29/2025

Return to

May 2025 Capitalist Times Live Chat

powered by

Prev Page View Full Chat Next Page

Michael

4:49

Could NextEra Energy buy under XPLR Infrastucture in order to get the heavily discounted assets ?

Roger Conrad

4:49

Hi Michael. I thought that was a strong possibility before the results of the strategic review were announced in January. At this point, however, it looks like the thinking is to eliminate the CEPF overhang and restore XPLR/Next Era Energy Partners as a fund raising vehicle for the parent NextEra Energy. That at this point looks like the best course of action for NEE--and XPLR would essentially be financially restored under the recovery plan around the time tax credit from IRA phase out under the House budget bill.

I wouldn't wholly rule out an eventual takeover. But NextEra has big plans in renewable energy the next few years, and by the 2030s in natural gas and nuclear. Being able to drop down assets to a thriving XPLR at a conservative pace could be invaluable, especially if interest rates remain elevated.

JT

4:50

Hi Elliott, what are your thoughts on the current stock market rally? Has the strength of this V-shaped move alternated your thinking about whether we are in a bear market or the start of a new bull market? How do you plan to adjust the model portfolio in CW based on this?

Elliott Gue

4:50

The nature of the sell-off -- the speed and extreme selling pressure we saw in early April -- are actually very unusual at the start of a bear market. Typically moves like we saw back then are followed by powerful rallies, which is what we've seen since that time. This is the main reason I didn't take many steps to sell down out long exposure during that waterfall sell-off; it's also why I suspended my stop on close recommendations and then added long portfolio exposure in April. What we've seen since then is a very broad advance and I see no reason to stand in the way of that at this time. I suspect we'll see new all-time highs in the S&P 500 this summer though I think global markets may well continue to outperform and we'll likely see some leadership from groups like industrials and financials. In many ways it's a bit like what we saw in late 2018/early 2019 -- a very sharp sell-off in Q4 2018 followed by a V-shaped rally to new highs in 2019. I'm still looking for more long-side ideas for now. I do suspect

Elliott Gue

4:50

that, much like 2019, we could be in the latter stages of the bull market that started in 2022 and that the economic cycle may falter later this year or in early 2026. However, for now, I'm bullish.

Jack A.

4:52

Hi Elliott: In the year of natural gas, EXE has done well so far this year (up 16.2%), while BSM is down 7.3%. Is the divergence due to the low price of oil. To what extennt should BSM benefit from natural gas sales this year? Thanks.

Roger Conrad

4:52

Hi Jack. Black Stone is a royalty trust with its primary properties in areas that need at least $3 per mmBTU natural gas prices but where activity will really pick up steam at sustained $4 gas. We think that will happen. But until it does, BSM's dividend isn't likely to grow much. In contrast, EXE is an operating company and has multiple levers to pull to boost free cash flow, which has been the primary driver of the stock. They're somewhat apples and oranges as investments, though we like them both.

Victor

4:54

Hello Elliott, On your last EIA issue you called XOM "Yielding almost 4 percent, this national treasure is a buy
at 110 or less." However, on the managed portfolio table it is listed as "Hold". Can you explain why? Thanks.

Roger Conrad

4:54

Victor. We like ExxonMobil a lot. But we're not willing to pay any price for any stock. And at this point, other than through a DRIP, we would not buy XOM over 110. It's actually close to 100 now.

Jack A.

4:55

Hi Elliott: There has been a lot written about the maxing out of output in the Permian with fracking.... What impact will this have on our pipeline holdings? Thanks

Elliott Gue

4:55

The peak of the Permian will likely look like a plateau, not an inverted "V." And I suspect that we'll probably see production hold around a peak level for many years before there's a meaningful long-term decline. In other words, you'll see cyclical fluctuations driven by commodity prices, but there won't be a true terminal production decline driven by geological realities for some time yet. All that said, most of the midstream/pipeline companies are more leveraged to the natgas/natural gas liquids side and, buy definition, I would expect further gains in productions of NGLs/gas even as oil production flattens out. Generally, wells and fields get gassier as they age. So, I see this as quite a favorable development for many of our recommendations.

RBB

5:01

Would like to know from Elliott about a snap shot thought about TLTW. I admit that I hold it and consider it a keeper as long as the annualized percentage paid to the holder is comfortably greater than any unrealized loss of record . . . especially since the charts reflect that the valuation is historically low. Thanks in advance.

Elliott Gue

5:01

I was traveling last week and had the occasion to listen to financial TV with the sound on (as opposed to muted in my office). And it struck me that despite all the talk of spiking interest rates and a bond market "crash," TLTW is still up 2.5% including distributions this year, which beats the S&P 500 by a nice margin. I think long-term rates (the long bond which is the underlying asset in TLTW) is likely range-bound over the next few months and we're currently closer to the highs than the lows of this range (highs in yield/lows in price). That's a great environment for TLTW as it sells calls to generate additional premium income. What worries me most is that we could see a big rally in bonds -- drop in yields -- if and when a recession looms into view. When that happens I'll be looking to sell TLTW and buy TLT or some other long bond instrument. Until that happens, I think TLTW is a great vehicle and something I'm comfortable holding.

Guest

5:01

Suburban Propane has been basically able to hold on to its increase from late in 2023 into 2024. Roger's report card cited pretty good results or Q2. For sure, it hasn't been unimpacted by higher-for-longer rates. That said, the distribution coverage seems healthy and its slightly below your buy boundary price. Any thoughts on adding to an existing position for it close to 7% distribution? Also, congrats on EXE (and EOG + EQT) you both emphasized last fall. Do you see variable div increase above the base rate for any of the "Es"? Thanks very much.

Roger Conrad

5:01

Thanks for those questions. I'm glad you were able to take advantage when those natural gas producer stocks were so cheap. It looks like most companies paying variable rate dividends are going to use any additional cash for buybacks, rather than an additional cash payout. That may change if oil and gas prices strengthen this year as we expect them to. But the name of the game is staying conservative at this point.

As for Suburban, my view is the fuels distribution business will continue to consolidate. Sunoco LP's takeover of Canada's Parkland Fuels is the latest big deal--and it signals that SUN's general partner Energy Transfer is interested in expanding in this business at the right price. Buying Suburban into SUN in an all equity deal would not be a taxable event. But that said, SPH has strong dividend coverage and a strengthening balance sheet. And I rate it a buy at 20 or less.

Guest

5:04

PS: SPH is an income generating position for me and much cap appreciation isn't expected

Roger Conrad

5:04

Assuming this is an addendum to the previous question on Suburban I just answered. I think that is the proper view for SPH. Management obviously does now want to increase the dividend to a level it won't be able to sustain if say the weather turns out abnormally warm in winter a couple years in a row as it has in the past. And the last boost was back in July 2021. They may resume some level of increase in future. But for now price stability and the nearly 7% yield are my expectation for as long as Suburban stays independent.

Victor

5:04

Hello Elliott, VLO added almost 30% from its lows in early April. Where do you see VLO by the end of this year? Thanks.

Elliott Gue

5:04

Longer term, I think VLO goes well over $200 based on a normal energy market and mid-cycle earnings multiple. Refiners are sensitive to energy demand so the quick rally in VLO tells me that the market sees a global oil/gasoline/diesel recovery. That's also the sense I get looking at consumer stocks -- especially discretionary consumer stocks like CCL (cruises) and the airlines. If that holds up into summer I wouldn't be surprised to see VLO near last year's highs later this year.

Guest

5:11

Is the recovery of Algonquin on schedule? It is off the bottom and looks to be recovering with their new plans.

Roger Conrad

5:11

it appears Algonquin's recovery is on track. And I think the stock is headed a lot higher as management's plans unfold. The sales of the renewable energy generation unit and the 42% ownership stake in the former Atlantica have closed and the cash used to cut debt. And I would expect a deal for the contracted hydro assets to further reduce debt in second half 2025. The key now is eliminating rate lag in various key jurisdictions and then ramping up utility capital spending to a level that will support solid earnings growth and competitive dividend increases. And those appear on track as well.

During the Q1 earnings call, management promised a "multi-year" guidance update on June 3. At that time, I would expect to hear more about targets for earnings and debt, progress of regulatory initiatives and the potential sale of the hydro facilities and the company's investment plans in general. Until then, my highest recommended entry point for anyone who doesn't own Algonquin is still USD6 for the NYSE-listed shares.

Susan P

5:12

apologies for not including my name in prior q's re sph and the "e's"

Roger Conrad

5:12

Not a problem. As you can see, some folks use their names and others use something else. But we appreciate all your questions and comment just the same. Thanks for asking them.

Roger Conrad

5:14

And thanks for joining in on my Discord "Dividends Roundtable" forum as well Susan! At this point, it's only open to the customers who've joined us through Substack. But I'm hoping to make it more of a thing for our best CT customers as well.

Frank

5:20

Long time holder of Peyto (PEYUF) and appreciate their low cost, but where do you see this going forward, They seem to be treading water now, and not moving much

Roger Conrad

5:20

Well, it's mainly natural gas prices that have held Peyto back. If you've followed the company as long as I have--really stretching back a think a quarter century now--then you've seen them cope with sub-$1 natural gas prices. Times were tough but they held it together then and they're still doing it--cutting cash costs to CAD1.42 per Mcfe from CAD1.51 12 months ago. That's actually barely $1.

I do think Peyto and other AECO region gas producers have a lot to gain from Canada's emergence as a major exporter of LNG and NGLs to Asian markets. They're not as close as BC producers to the new export facilities entering service. But connections are expanding. And we're bullish on gas. We rate the stock hold at this price. But the Dream Buy is just USD10. Look for a feature piece on Canada in EIA in the near future.

Victor

5:22

Elliott, I still own some shares of OXY.WS as part of OXY's M&A. Would you buy OXY.WS in lieu of OXY? Thanks.

Elliott Gue

5:22

Those warrants expire in a little over 2 years (august 2027) and have a strike price of $22. Based on OXY's current share price that gives them an intrinsic value of a little under $20, which is about where they're trading. SO, I don't see any advantage to buying the warrants over the common right now.

Victor

5:22

Elliott, I still have OXY.WS (this was part of a M&A of OXY

5:23

Guys, how do you feel about OVV? It has been in a downtrend since it was added to the portfolio. Do you expect a reversal any time soon? Thanks.

Roger Conrad

5:23

Ovintiv has actually bounced about 20% since mid-April. And we think we'll see a price in the neighborhood of our highest recommended entry point later this year (USD56). In my answer to a previous question on the company, I mentioned the energy price related cut in guidance following the Q1 earnings release as being highly anticipated by investors. Now guidance is based on what I consider to be quite conservative assumptions for energy prices. And a beat seems likely if our commodity price forecast proves on the mark.

We highlight Ovintiv earnings in the EIA issue that just posted--so there's more on our view there.

JT

5:25

Hi Elliott, I hold both PBF and VLO. Both are down since purchase, with PBF being down substantially more than my VLO position. I am considering selling my position in PBF and taking the proceeds to buy more VLO so that I'm in the strongest refiner as I wait for a recovery in refining margins. Is my logic sound or would a recovery benefit PBF much more than VLO, hence making my logic flawed?

Elliott Gue

5:25

PBF has heavy exposure to California which is chronically short of refining capacity. So, it's the more leveraged play and would move faster in an improving refining margin environment. Right now, I believe the action in the refiners suggests that's what the market is pricing in this summer, so I like PBF as a trading vehicle on that and it's not hard to see a scenario where that trades up to $40 or $50 in a strong market for refiners this summer/fall. As a a long-term holding, however, VLO is the way to go.

Mack

5:28

Hi guys and thanks for another great chat..... Two items: First, I'm still holding some WMB, Do you still have it as a sell? Second -- anything going on with HESM other than the fluctuations on the market? Thanks...

Roger Conrad

5:28

Hi Mack. I think Williams Companies is a very strong midstream with multiple investment opportunities to sustain target mid-to-upper single digit percentage cash flow and dividend growth. But like the other C-Corp midstream companies--including Kinder Morgan and ONEOK--it's run up on buying momentum. And it's now trading at a huge price premium to midstream MLPs with at least equally strong growth prospects like Energy Transfer LP (NYSE: ET) yielding 7.4% to WMB's 3.3%. That's the reason for the sell--nothing to do with the underlying business but the fact that there's far greater value in the midstream space than WMB near an all-time high.

Roger Conrad

5:31

As for Hess Midstream, I don't have a lot to add to what we've posted in the Portfolio section of the May issue of Energy and Income Advisor now up on the website. HESM had strong Q1 numbers that support upper single digit percentage dividend growth. And the end game still looks like a full privatization by Chevron, if that company succeeds buying out Hess Corp. HESM is trading above our max entry point of 35, however.

Guest

5:33

Have some PBA, but have been considering adding to it for over a year. Is now as good a time as any to buy some more to bring it up to a balanced portfolio? I like the Canadian gas companies now. Jim T,

Roger Conrad

5:33

Hi Jim. As indicated in the EIA issue Portfolio discussion--and before that in Conrad's Utility Investor comments--Pembina certainly appears to be on track with its investment and growth plans, both in the near term and longer term when it should be a prime beneficiary of the growth of western Canada energy exports,. I also think it's at a good buying point for anyone light on it.

Arthur

5:41

Thank you Gentleman, Please name several MLPs you like for fresh money buys.

Please comment on the following stocks. Any particular concerns? All have been a bit beaten up.
SLB
KHC
AMAT
ESI
CHRD
KEY

Roger Conrad

5:41

Hi Arthur

We highlight several good fresh money midstream MLPs in the Portfolio Discussion section of the May issue of EIA--which is now posted on the website. Our favorites are still all in the Model Portfolio. And we provide analysis in that section as well, including updated advice. Energy Transfer LP, Enterprise Products Partners and Plains All-America Pipeline are all at good buy prices now,

We still like SLB, which is highlighted in the EIA issue as well. I've answered a couple questions on Kraft Heinz during the chat, which I'm rating a hold in CUI Plus/CT Income for reasons described in the May update I posted two weeks ago. I've mentioned Chord Energy as a C-Corp alternative to Black Stone in that portfolio because of its variable dividend and thereby leverage to our bullish energy outlook. The company recently raised its base dividend and Q1 results were solid. So while investors would have been better off with BSM, I do expect a recovery with oil prices.

Connecting…

Your current subscriptions

None

Register now to continue managing your subscriptions

E-mail Address	Chat Owner	Status	Remove

Enter your email address to be notified when Sherry Roberts hosts a chat