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2/29/24 Capitalist Times Live Chat
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AvatarRoger Conrad
1:47
Hello everyone and welcome to our Capitalist Times live webchat for February. As always, there is no audio. Just type in your questions and we'll get to them as soon as we can comprehensively and concisely. We will send you a link to a transcript of the complete Q&A, most likely tomorrow morning as by design these things tend to go for a while--mainly until we've answered all the questions in the queue as well as from emails received prior to the chat.
Per usual, we're going to start posting answers to questions we received prior to the chat.
1:48
Q. Dear Mr. Conrad. I am sure that you know about the 38% reduction in the dividend with Newmont Mining (NYSE: NEM). Is now a good time to add to the position ? Buy sell or hold? Best—Aaron S.
 
A. Hi Aaron. Newmont basically eliminated the variable portion of its quarterly dividend to fund a $1 bil stock buyback. I think that’s probably the right decision for the longer term as the stock looks very cheap. More important are the plans announced to streamline operations following the Newcrest merger, which if executed will result in a considerable reduction of costs and debt, and position the company for future strength in gold and copper prices. The weakness in the stock we’ve seen is directly related to investors’ disappointment that the Fed hasn’t yet pivoted to cut interest rates.
My view is the longer they wait, the greater the restraint on investment in new supply—including key metals—and the higher inflation we’ll see down the road. But for now, we need patience and I’m sticking with our current Plus position.
 
 
Q. Your thoughts on Chevron Corp (NYSE: CVX) warning investors that ExxonMobil (NYSE: XOM) and CNOOC are asserting they have the right to pre-empt their bid for a stake in oil project off Guyana through the Hess Corp (NYSE: HES) merger. Thanks—Lee O.
 
A. The parties seem to believe they’ll reach an agreement. For one thing, Chevron would be stronger financial partner than Hess Corp. But mainly, there’s no way Exxon/CNOOC can take control of Hess’ 30% ownership stake absent an agreement.
 
 
The “right of first refusal” to buy the asset would only potentially come into play if the Chevron/Hess merger closed and a court agreed the all-stock merger constitutes a real change of control. But if that happened, this would violate a condition of the merger. The deal would collapse, and thereby eliminate the condition under which Exxon/CNOOC would have a claim on the asset.
 
We did recommend Hess Corp on its own before the Chevron merger was announced. So if this deal falls through, there’s still plenty to like and my under is the “right of first refusal” issue would be moot, so Hess would still have the Guyana stake. Chevron itself also has plenty of other places to invest. And we believe this energy up cycle still has a lot of room to run.
 
 
Q. Dear Folks, Roger just posted on Substack a piece about the improving fortunes of coal companies. Both CEIX (Console Energy) and ARLP (Alliance Reources) have taken quite a beating lately in share price. 
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ARLP in their earnings call talked about adjusting the dividend as the market didn't seem to be appreciating the very high yield. When you are talking about coal, I assume you are referring to these two companies. Do you have a preference for one over the other? If so, why? And is this merely a dividend play or do you see significant price appreciation? 
 
I would like to slip in a REIT question here. Roger recently mentioned that he thought WPC had brighter prospects than Reality (O). Yet the earnings calls for the two companies seemed to favor O. WPC seemed to have a bit of trouble explaining why they had failed to catch a large client that suddenly went bankrupt on them, leading to various Rent concessions. Analysts on the call were definitely troubled by the answer. Reality, on the other hand, exceeded expectations. I know this is only a quarter. But why do you rate WPC as significantly higher, especially since WPC said on the call that it was looking to get into retail -- which is a Reality specialty.
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Many thanks, Jeffrey H
 
 
A. Hi Jeffrey. First off, thank you for mentioning my Substack. Both Elliott and I are active on the forum. And we strongly suggest our readers sign up for the free content provided if nothing else. You can do so by going to Substack.com and typing in our names. My column is weekly emailed on Sunday’s. Elliott’s is a bit more frequent.
 
I guess I would prefer ARLP as a coal play for a couple of reasons. First, it pays a dividend that would be superior even if cut in half. My view is investors should view the payout as
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highly variable. That’s more than compensated for by a mid-teens yield. But the dividend depends on realized selling prices for coal to a large extent.
 
Management did say during the call that the company faced a good deal more potential variability on pricing in 2025. And while it believed coverage would be sufficient then, they held out the possibility the payout could be reduced if coal prices weren’t there to support it. The CEO also said “the market” wasn’t appreciating the high yield and last year’s increase but remained committed to returning cash to shareholders. I would read that as if free cash flow is there, they may favor a stock buyback over a dividend increase. But again, ARLP and its dividend are a bet on coal prices. I also favor ARLP over Consol because it has a growing oil and gas piece that will only be more valuable as the energy upcycle goes on.
 
On the REITs, I rate both buy in the REIT Sheet coverage universe and have for some time. But I also think the Realty Income and WP Carey
comparison is really apples and oranges. Carey is highly focused on built to purpose properties serving its customers—with a major specialty now in industrial. Realty Income properties are more multi tenant. Carey is also emerging from a restructuring, which is what I meant about having more upside—as it completes that transition.
 
 
Q. Thoughts re WPCarey Spin out of OFFICE segment and future results of balance of company. Jim N.
 
A. Hi Jim. I featured WP Carey in this month’s REIT Sheet, along with analysis of Q4 results and guidance. I think the firm is now more focused on its strategy after the NLOP spinoff. And while there was apparently some disappointment with the dividend growth guidance—in part because of capital allocation decisions—the yield is attractive even on a slow to no growth assumption.
I also think NLOP will continue to surprise on the upside and will continue to track in the REIT Sheet as well.
 
 
Q. Hi Roger. Artesian Resources (NSDQ: ARTNA) has been dropping relentlessly. I purchased it in 2020 and 2021 for $37-$41 and now am down about 12%. Is there a bottom to the drop? Did I just pay too much for it? Is this related to waiting for the Federal Reserve to cut interest rates? What is your advice? Thank you.--Teresa P.
 
A. Hi Teresa. Artesian is basically following other water utilities lower—as the premium valuation the group has had shrinks. I think that is related to the Fed and interest rates, as money sloshes from one sector to another. But the company itself still looks healthy and I expect that to be confirmed when it releases Q4 results on March 8.
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I also believe it has takeover appeal. It’s difficult to say where the bottom is this year. But when the macro picture changes, I expect this stock to benefit.
 
 
Q. Hello Roger. I'm a new subscriber - Sherry said you would accept emails. Background; I'm back with you after a long time away. I followed you when you did Utility Investor at a former publisher. Anyway, - you had an accompanying service - 'Power Plays" - which I really appreciated, especially several energy takeover plays where future buyouts were at a specific price at a determined date. My question is: do you now or would you consider advising on future plays of that type?--Robert F.
 
A. Hi Robert. I think we will see more utility consolidation in the future. At this point, companies have massive opportunities to invest in systems, so that’s been the focus of capital spending rather than M&A. In contrast, opportunities to invest in conventional energy are limited given regulation and capital markets hostility.
So we are seeing a major uptick in oil and gas mergers, producers and midstream. And we have been making recommendations in that sector—both betting on deals in progress as I did with Power Plays and picking new targets. Where there have been mergers in the Utility Report Card companies—bets on deals in progress—I do provide advice. But I don’t at the moment have a separate service for this. Thanks for your interest and for subscribing!
 
 
Q. Hi Roger. Sorry to bother you, but I came across NEE/R. A Nextera convertible preferred. Could I get your opinion on this one? I did great with Center Point, losing my shorts with Algonquin, so I'm not sure I really understand these. What I do know is NEE is a much higher quality company than both of the others.
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The dividend is very high and to me it looks like one would make money on the conversion at this price. Appreciate your time. Best regards. Jeff B.
 
A. Hi Jeff. No problem. I'm not sure about the "R" designation. Preferred stock "symbols" tend to vary widely depending on where you track them. But I believe this is the NextEra convertible preferred stock I recommended in the December feature article for Conrad's Utility Investor. The preferred was issued when NextEra traded at a meaningfully higher price, so it's now discounted to the initial par value of $50. At a price in the mid-30s, it currently yields about 9.5% and will pay a quarterly dividend of 86.575 cents per share for another year and a half--the last in September 2025 when it converts to NextEra common stock. The conversion rate is 0.45 to 0.5626 shares of NEE. Shareholders will receive the maximum number so long as NEE is trading at $89 per share or less.
You'll get the minimum if NEE rises to $111 by the conversion date, and something in between to equal a par value of $50 if it trades between $89 and $111. With NEE at $57, the current conversion value of the preferred is around $32--the preferred trades at a premium to that because of the higher dividend. I think the preferred is attractive for those who want a higher dividend while we wait on NextEra shares to rebound. You'll get a bigger capital gain if NEE can move past $89. Otherwise total returns are going to be roughly the same. 
 
 
Q. What are your thoughts on New York Community Bancorp (NYSE: NYCB)? Are they a low risk of failure at this point? It looks like some of the fall is a knee jerk reaction. Sell now and ask questions latter type reaction. Your comments appreciated. Monroe J
 
A. Hi Monroe. Thanks for your question. NYCB shares have come back a little since your email but are still down more than 50% year to date. And there are still quite a few unresolved questions,
though most of the reaction following the release of Q4 numbers appeared to be related to investor worries about the direction of the bank--rather than actual results or even 2024 guidance.
 
That said, our preferred way to play this would be with another small/regional bank that doesn't have the obvious problems NYCB does with commercial property. The group has been seeing some upside momentum before NYCB's announcement. And several like Arrow Financial we have in the CUI Plus/CT Income portfolio reported pretty solid Q4 results that indicate business is strong. Any real recovery in
NYCB from its current woes will help stocks like Arrow. And if there's worse to come, they won't vanish on us as NYCB still might.
 
My view, given what we've seen for other struggling banks the last couple years, is that the authorities would engineer a rescue merger for NYCB before they would let it fail. But if that were the case, the stock could easily halve from here. I wouldn't say the same thing if NYCB were a regulated utility. But banks just don't have that ultimate assurance of survival. So long as the Fed is keeping interest rates where they are, failure risk will be high. And if the Vice Chair for Supervision's comments last week are any indication, they're not particularly concerned with banking system troubles now: "A single bank missing its revenue expectations and increasing its provisioning does not change the fact that the overall banking system is strong, and we see no signs of liquidity problems across the system
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'
 
Of course, we've rarely if ever seen a Fed this reactive to markets and data points--so they could shift in a hurry. But considering the risks, I'd rather own a solid bank with a fallen share price than a weaker one that also looks cheap.
 
 
Q. If I buy NextEra Energy Partners (NYSE: NEP) for tax deferred income and nee is to be bought ou what will happen with NEP?—Eric D.
 
A. Hi Eric. First, I would consider a takeover of NextEra Energy as a low probability event. Even at this very discounted price, the stock still has a $115 billion market capitalization--which is considerably larger than any other utility company, with Duke Energy next at $70 bil.
Far more likely is the company would be an acquirer of other utilities when the time is right. And in fact, it has made the attempt a couple times in recent years, though unsuccessfully.
 
As may recall, late last year NextEra suspended drop down asset sales to its NextEra Energy Partners affiliate for the time being, which raised speculation that it would move to acquire the 45% economic interest in Partners currently held by the public. NextEra Energy management, however, has since given every indication that it intends to continue utilizing Partners as a financing vehicle in the future, thereby keeping NEP shares publicly traded. 
 
That's what I expect as well. And I look for NEP shares to recover fully over the next couple years, as its ability to fund drop downs improves. It is possible that conditions will not improve enough and that NEE will decide to go ahead and buy in the public interest in NEP.
But even in that case, the only taxable event would be a capital gain or loss if NEE paid cash rather than shares of stock, which in my view would be more likely. Despite having "Partners" in its name, this company is only a partnership to NextEra Energy, its parent. Shareholders of NEP, in contrast, are in effect treated as ordinary shareholders. You get a 1099 at tax time, rather than a K-1. And the payout is qualified dividends, rather than tax deferred income.
 
 
Q. Do either of you follow and have an opinion on PBR, the large energy producer from Brazil?—Rick P.
 
A. We do track Petrobras in our Producers and Service Providers coverage universe on the Energy and Income Advisor website. We currently have it rated a sell mainly because of its strong recent performance and our preference for other large oil stocks.
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Lula's government in Brazil has proven to be far more favorable to the country's energy sector than many expected, including us. The government has supported new offshore development as well as infrastructure. And it has not laid down significant onerous new regulation or price mandates to support local industry and to hold down prices. That's very likely in large part because global prices have come down, relieving macro economic pressures from energy as we saw in 2022. But it's given Petrobras room to breathe and the company has responded with strong output of gas (up 11% year over year) and oil in the pre-salt (up 18%) for Q4. The company has just announced a $100 bil "fade-out" plan for oil with government support, even as it invests in CO2 free fuel sources such as hydrogen. And it plans to capture 10% of Brazilian wind and solar by 2028.
 
That's all very positive for shareholders. But it now appears to be priced in for the stock. And unlike ExxonMobil et al, Petrobras is still a national oil
company with the government wielding key influence. That means long-term political risk we don't have to take on with other energy stocks. Again, things are going very well for this company right now. But the price and the fact that can change with political winds are reasons to prefer other stocks.
 
 
Q. Roger. If I am just starting to invest in utilities and I want to place a large bet on 5, which 5 positions would you pick for my portfolio. Income (average 4% dividends over the 5 positions), potential dividend growth, and safety. Thanks for these opportunities to ask questions. I read every question and answer and find them very useful.--Gary S.
 
A. Hi Gary. My suggestion would be to pick five from the Conservative Holdings, tapping one company from the essential services companies represented.
For example, you could have Avista as your energy distributor, Brookfield as a contract renewable energy power producer, Southern Company as a regulated electric utility, TC Energy as an energy infrastructure owner and Verizon in communications.
 
 
Q. Who bought MMP? Where did my shares of MMP end up? I should know this but I cannot remember. As always thanks for your time and effort for these chats.—Jerry J.
 
A. Hi Jerry. Magellan was acquired by ONEOK Inc (NYSE: OKE) on September 25, 2023. The terms were $25 in cash plus 0.667 shares of OKE per MMP unit. You can search what I wrote about the deal on the Energy and Income Advisor website.
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I also had information and analysis in Utility Report Card comments in CUI. OKE shares are up about 10% since the deal closed and the company has so far increased its dividend once to 99 cents per share. We continue to own it in the EIA Model portfolio.
 
 
Q. Dear Roger/Elliot, I'm wondering if you follow Air Products and Chemicals Inc (NYSE: APD). It would seem to be more than a tangential fit for Energy and/or utilities with its strong investment in blue/green hydrogen in both US and abroad. It's recent earnings transcript was extremely interesting -- and its price has dropped quite a bit of late (on its rather dour predictions for China's economic growth). But its US and Saudi hydrogen projects seem to be very much on track. Best regards--Jeffrey H
 
A. Hi Jeffrey. APD is probably one we could add to coverage, given the connection to the hydrogen business. I did add the battery storage company Fluence Energy to Utility Report Card
coverage this month as a "Utility Technology" sector entry. After dropping this year and raising its payout for May, this company also has a decent and safe yield. And while weakness in China is a risk, the earnings multiple isn't particularly high either. We'll take a look. Thanks.
 
 
Q. Hi Roger - I think my questions for the last Live Chat got lost in the pile. If any of them are still timely next month, I'd appreciate it if you would roll them forward into the next Live Chat question queue. Meanwhile, should we read anything into the appointment of a former Brookfield exec onto the Algonquin board? AQN is obviously still shopping the renewables portfolio. Looking forward to Monday's edition, and best regards. Dan N.
Happy 2024!
 
1. You've recommended BHP in CUI+ for some time, but being Australian it has a high dividend withholding rate. While I know those withheld taxes can be partially reclaimed when filing tax returns, I prefer to avoid foreign withholding for dividends in my retirement accounts.
What do you think of RIO as a close substitute for BHP? Being UK-based, RIO has no dividend withholding, so taxes are simplified and the entire dividend flows into the retirement account.
 
2. I noticed your big jump in the buy limit for NEP after Q4 results were announced, which included an anticipated 6% boost in NEP dividend next year. That sounds like you were very reassured that NEP will avoid the refinancing crisis the market still seems to be pricing in. Do you see a particular point of disagreement between your analysis/projections and the market's?
3. LNG export facility approval suspension sounds on the surface like bad news for ET and the Lake Charles project. But I also had the impression that the Lake Charles project was at the back of the line for approvals anyway, so does this really move the needle?
 
4. For 2024 pans, it was unlucky timing that Sunoco announced a Nustar buyout right after the January edition. What do you think of the merger? But as an ET holder,
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I also wanted to ask about the relationship between ET and SUN, since ET holds a chunk of SUN units. Non-factor for ET? Or could there be asset swap possibilities there? Could ET offer to swap SUN shares for selected NuStar pipelines?
 
5. The drama at MPW continues, and it now hovers around 3. What do you think of MPW extending more financing to its biggest tenant who's already failing to make payments? Is the market over-reacting? Do you have an idea if/when it might be worth reacquiring a few shares? Another big dividend cut is obviously priced in down there. Or is MPW circling the drain?
6. Anything on the AQN renewables sale/turnaround watch? Do you suppose drawing this out is a good sign (multiple bidders), or bad (lack of acceptable bids)?
 
7. I'm surprised no one has stepped up for the AQN 40%+ stake in AY. Yielding 9% (a payout you've described as very safe), dividends after buying the AY stake would essentially cover expenses even in an all debt-financed acquisition, right? Why wouldn't AES
(for example) jump on this? I noticed AES recently had HASI finance stakes in a big collection of renewables projects, and AES is getting creative with asset sales and selling ownership stakes in FLNC to raise capital to keep up its renewables buildouts. Wouldn't it be better to finance with and/or dropdown to its own yieldco? ...and keep that financing option available for the long runway of renewables buildout through mid-century?
 
 
A. Hi Dan. Sorry we didn't get to these last time around.
 
Starting from the top, I prefer BHP to Rio because of its greater focus on expanding in a relative handful of resources where demand is likely to be greatest over the next 15-20 years, as well as its geographic concentration in Australia--which is by and large a more pro-resource country and is proximate to Asian markets. You can also recoup withholding tax as a credit on your US taxes. That said, Rio and BHP as mining company stocks do have a reasonably close correlation, And in a full blown resource bull market such
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as I think is coming, both stocks should perform quite well. 
 
Second, I believe NextEra Energy Partners' current price reflects an expectation that parent NextEra Energy will ultimately buy in the 45% economic interest owned by the public, perhaps at a small premium to the current level. My view is capital markets are likely to look quite different by then, which will enable NextEra to again utilize NEP as a funding vehicle by resuming drop downs. And in that case, we will see NEP at a much higher price.
 
Energy Transfer LP's Lake Charles LNG project actually does have an export license now. At issue is the company's attempt to extend the deadline for first production in order to keep the license. It's very much an open question now whether that will happen. But as far as the overall company's prospects, it's a minor issue as management has multiple places to deploy funds profitably--including acquisitions.
 
Fourth, Sunoco LP's merger with NuStar Energy LP is best understood as an Energy Transfer deal. It
just using the stock of a company it controls as currency. Dividends from SUN contributed around 9% to ET's Q4 EBITDA and I would expect that to increase when this deal closes. It is always possible that ET will eventually buy in the SUN owned by the public, as it's done with other units. But this deal also demonstrates the value of having other ways to raise capital. And there is a real earnings benefit.
 
Fifth, Medical Properties Trust is releasing Q4 results and updating guidance February 21. And I would expect an update on the challenges with Steward Health as well as other tenants facing a challenge to cover their rents to the REIT. Management may also take the opportunity to further "reset" the dividend, which as you'll remember was cut almost in half back in August. The company's March 2025 bonds are yielding an elevated 11% plus--so it's going to be tough to do any refinancing on decent terms. That may induce the REIT to just go ahead and eliminate the payout to hold in the cash. But the real issue
is the crunch hospitals are feeling with rising costs and government/insurance companies etc not really making up the difference. This company will always own the buildings. And in past years, management has been successful finding new tenants when new ones go bust. But I think risk is high it's going to have to live with a lot less cash flow. And until there's really an indication of where the bottom is, I'm happy being out of MPW.
 
Sixth, Algonquin is scheduled to release earnings and update guidance on March 8. And I would expect a full update then on the progress of the renewable energy sale. What's been working against the company has been that other utilities have also been selling assets. I do think it's encouraging that a former Brookfield managing partner is now on the Board--and as you know Brookfield has been a major investor in several Canada-based power companies. I think we're going to have to continue being patient with Algonquin a while longer. But the good news is the Liberty Utilities unit
2:00
has been able to offer debt at reasonable prices. And the only significant maturity at the parent level this year is the convertible preferred--so no need to refinance or pay in cash.
 
Finally, I think we have to be at least equally patient with the situation at Atlantica Yield. The company announces numbers and guidance on March 1. And there's every indication to expect a stable result that supports the dividend and balance sheet, even if there's no real news on the strategic review of what Algonquin's going to do with its 42.16% of the company. Keep in mind that all of Atlantica's debt except a bond maturing June 2028 is at the project level and amortizes fully over the life of current contracts.
 
 
Q. Dear Roger, I read with great interest the earnings call transcript of BEP and thought, "Great -- long contracts with solid corporate customers who need clean power for AI growth" -- and then you came out with a similar appraisal for utilities and AI. Yet the market is simply crucifying BEP
-- despite the dividend raise. and the company's ability to place green bonds at fairly decent interest rates. I truly don't understand this negative reaction -- more severe than what the market is doing to other utilities (although BCE also just got hit after a dividend raise and decent earnings report). I am buying utilities on your A list incrementally (in small amounts) as they sink but I do wonder if I am simply crazy to do this when the market (which I assume includes some very smart investors) seems to be doing otherwise. I would appreciate your response (maybe this is simply a plea for hand holding) Best regards, Jeffrey H.
 
A. Hi Jeffrey. Both BCE and Brookfield Renewable are still out of favor as dividend stocks. And with the Federal Reserve going out of its way to tell us how it's not going to cut interest rates, a lot of money is sloshing around
. Keep in mind that even as long-term borrowing costs have come down for utilities the past few months--including for BCE and BEP--short-term rates which the Fed does heavily influence are still quite elevated. And that means money funds like Vanguard Federal Money Market I've recommended are still yielding well north of 5%, which has depressed the appetite for dividend stocks from even longer-term investors.
 
Money market yields, of course, will plunge if and when the Fed does pivot--which given how reactive this central bank has become could pretty much occur at any time. And when that happens, money will come sloshing into dividend stocks and bonds, pushing up prices very quickly.
 
I don't think there's any business reason for the weakness in either stock, particularly Brookfield which as you pointed out had very strong numbers and particularly guidance. There has been weakness in renewable energy
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energy stocks apparently related to the potential for a Republican victory in November. BEP's contracts, however, are more than 90% with corporate customers who are motivated by economics rather than politics and show no sign of slackening demand--particularly with AI demand from data centers exploding. Even in the unlikely event IRA tax credits are repealed, that demand is set to continue fueling its growth. BCE, meanwhile, continues to find places to invest despite its current battles with the Canadian government. Dividends and balance sheets are solid for both companies as well, as recent payout increases demonstrate.
 
It's never easy to predict when out of favor stocks will return to favor. And it always requires patience on the part of investors. What is sure, however, is so long as these companies stay solid on the inside, they will return to favor
favor ultimately. And in my view, both of these companies will. 
 
 
Q. Your Capitalist Times transcripts are must-reads for me. I have a query for your next session.....A recent article in the WSJ mentioned that there is a surge in demand for electrical grid hookups in the Permian and Bakken basins, and that current infrastructure is not in place to meet the demand for electrical power. There were three states mentioned-Texas, New Mexico and possibly North Dakota. Xcel Energy was mentioned as a beneficiary of this surge, and it would seem to me that ATO may benefit as well. Assuming that the WSJ article has credibility, my question is: Is this just a temporary blip in demand in the Permian/Bakken basins or does this trend have legs? If it has legs, are there companies other than Xcel and ATO that may merit a look-see for investment? Where will the energy come from for the shale oil producers wanting to connect to the grid but cannot now for lack of grid power and grid infrastructure? Thanks for any light
Capitalist Times may be able to shed on this issue.—James G.
 
A. Hi James. There's actually been increased demand in the Permian for electricity for several years. In Texas, regulated utilities like Sempra Energy, Xcel Energy, American Electric Power, Centerpoint Energy, PNM Resources etc operate the distribution and transmission wires. But under 1990s deregulation, power generation and marketing are competitive businesses--and utilities were required to divest those operations close to 30 years ago. The utilities operating in west Texas are seeing strong customer growth and therefore increased rate base, which is the basis for earnings. The power producers, however, are likely to get most of the benefit from increased demand. Some to watch are Vistra Energy, NRG Energy, Constellation Energy (especially now as owner of the South Texas nuclear plant), NextEra Energy (a great deal of wind) and Clearway Energy. I like Atmos Energy. And as a natural gas utility, it will also benefit from customer growth in the
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region. But it's not really a bet on inadequate electric utility infrastructure.
 
In the Bakken, the utilities are still regulated monopolies as states resisted deregulation. MDU Resources is one of the better utility plays. Xcel Energy also operates in the region.
 
 
Q. Roger:
2 questions:
1.   The only place I have been able to find NRG is in your CUI “Report Card.” Does that mean that if it is not 1 of your designated stocks, then it is not among the “best in class” that you recommend? 
2.   I own 380 shares with a basis of 34. Now they are 54. If you did not recommend it long ago, then I don’t know how I bought them unless I was reading Robert Rapier’s “Utility Forecaster” at the time. He has lay people subscribers who love to write in and to give advice rather than receive it from Mr. Rapier. 
Does the below person’s advice appear to be well founded? She writes “The fundamentals for NRG are really bad at the moment. Get out now. If you love the stock, I think at some point in the next three to four
1.   months, you will be able to buy it back well below where it is trading today. It has the potential to go as low as 45 in the near term, and perhaps as low as 30 going out a bit longer.”
2.   Since I do not see any advice in CUI about this company, sorry to burden you with this question – but you and Elliott really are the only ones whose advice I follow now with stocks.
Thanks Roger,
Barry
 
A. Hi Barry. I consider Vistra Energy and NRG Energy to be very similar companies as large independent power producers with energy marketing businesses. I have preferred Vistra as my sector pick the past couple years because of its focus on cost discipline and debt reduction--as well as building presence in energy storage
. And I'm happy with my call, as Vistra has returned almost 100% the last 12 months. NRG has also had impressive gains at 60 percent, I think in part because of excitement that activist investor Elliott Management is getting involved. But I think management still has to prove its acquisition of smart home operations is a natural fit. And I think Vistra's play to acquire nuclear power plants (NRG has sold) is a better move. 
 
To be honest, I haven't looked at Utility Forecaster--which I actually launched back in 1989 when I worked for my old publisher--since I left to help found Capitalist Times in 2013. So I really can't comment intelligently on what's going on over there. 
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Regarding both NRG and Vistra, I'm not sure what the author means by the "fundamentals" being "really bad." Both companies have in fact been enjoying some positive business momentum that should show up again when they report Q4 numbers later this month. But I do think both stocks have become a little expensive at this point. And I'm not recommending anyone purchase either at current prices, but only on meaningful dips. I will raise my highest recommended entry points for these stocks if the operating numbers justify it. Until then, NRG on a dip to 45 or lower, per the advice in the Utility Report Card.
 
Hope this helps. Thanks for your confidence in us.
 
Q. If the Chevron Hess deals goes through you stated CVX would own HESM. What are the chances they absorb it and give the owners CVX stock? I own it for the out sized dividend
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