I focus on a portfolio of dynamic, US companies propelling the world forward across multiple industries. Every pick shares three defining attributes: great story, compelling data, newsy catalyst, notes Adam Johnson, editor of Bullseye Brief.
Energy Transfer LP (ET) is the nation’s largest operator of pipelines and terminals serving the energy sector. Its network spans 90,000 miles across 38 states and accounts for 30% of total US capacity.
The company’s unprecedented ability transport, store and process hydrocarbons results from a series of targeted mergers and deliberate investments over two decades, culminating in a corporate consolidation last year.
This year, Energy Transfer will generate significant cash flow and reward patient investors with a 10% dividend -- yet it trades at just 5.2 times earnings due to energy sector pessimism.
Longer term, emotion will give reality and shares should rally. In addition, management has expressed interest in pivoting from a limited partnership to a c-corp, as many other former MLPs have done.
This would likely prove advantageous to shareholders, potentially adding 20-30% to the share price. There are many reasons to like ET right now. My target price is $14 a share.
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EOG Resources (EOG) sets the standard by which all other exploration and production companies are judged. EOG owns the best acreage across all the major shale fields in the US.
It’s also the lowest cost producer, with the least amount of debt. No other company matches EOG’s data collection, AI-driven analysis or entrepreneurial drive… and it only drills new wells with cash flow from existing wells.
The company generates a 15% ROE at $40 and has already hedged much of this year’s production. At every level, this is an exceptionally well-run business.
I’ve had several roundtrips in EOG, always on the long-side and always profitably. My bet on EOG reflects my belief that the economy will stabilize, and oil will re-inflate, especially since:
1. Oil inventories have declined steadily since June
2. Significant production remains shuttered
3. New exploration for replacement supply has virtually ceased
4. The nation will normalize as vaccines are administered, once again consuming 20Mb/d.
These are the fundamentals. Now we need patience. My target price for the stock is $80 a share.