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August 2026 Capitalist Times Live Chat
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AvatarRoger Conrad
1:59
Hello everyone and welcome to our Capitalist Times live webchat for August. We appreciate your participation today and look forward as always to a lively session.
2:00
The rules are the same. There is no audio. Just type in your questions and we'll get to them as soon as we can concisely and comprehensively. We will be sending you a link to a transcript of the complete Q&A tomorrow morning, in case you need to leave before your question is answered. And we will keep going so long as there are questions and comments left in the queue.
Let's get started with some pre-chat questions we received via email.
2:01
Q. I stumbled across this new issue (June 2026) for Gas Royalties: Whitehawk Minerals (WHK). They claim royalties of 49% of EQT production in Appalachia and 57% of EXE production in Haynesville. Over 7% yield at 1.3X and debt under 1.0X. Looks like they have hedges for $4 NG. Seems like they built up and sold prior companies like Sitio and Atlas Energy. How does this compare to other Royalty companies such as Blackstone?--Frank F
A. Hi Frank

The biggest difference is the limited trading history, since Whitehawk's IPO was in June. So while the assets look solid and the third party producers appear reliable (EQT, Expand, Antero, CNX), we don't have a lot of publicly available information on operating history, as we do with Black Stone.
2:02
Other differences include the key production area, which is the Marcellus Shale (55% output) and Haynesville shale (25%). Black Stone in contrast is focused on the Southwest, principally the Haynesville shale and Permian Basin. I generally favor this region for new
investment in oil and gas.

Other than that, the primary drivers for returns are pretty much the same. The higher natural gas prices rise the next few years, the more
drilling we should see on royalty trusts' lands and the higher cash flow and dividends should rise.
2:03
Q. Dear Roger, I would greatly appreciate your thoughts about Avista (AVA). The earnings report did not seem terrible yet the stock has sold off quite a bit. I've always thought that it was a high-yielding interesting little company. Is it's recent drop just part of a larger utilities sell-off or are their company specific issues that I need to worry about in terms of dividend sustainability? Many thanks for your patient guidance.--Jeffrey H.
 
 
A. Hi Jeffrey

Avista affirmed its 2026 guidance and posted a solid Q2 result as well. They have faced challenges from wildfires in their service
territory this summer. But at this point, system damages appear manageable and covered by insurance. And company equipment has been
neither charged or implicated with ignition--so it looks like what costs there are including business interruption will be temporary and
recoverable.
2:04
That said, as I pointed out in the August Conrad's Utility Investor, utility stocks as a sector have been under pressure this summer--I think mostly because of concerns about inflation and the sector swapping that goes on. There may also be concerns about the new data center load getting built being somewhat less than current projections. But as I've pointed out, growth projections for earnings are generally based on pretty conservative assumptions. And from the reaction of company managements, moratoria such as currently in Texas as actually being welcomed by the industry as an opportunity to catch up to rising demand.

Bottom line--still like Avista and sticking
2:05
with best in class utilities.

Q. Hi Roger, I like to ask a question for this month's webchat. In August's newsletter about the AI development of data centers all over the country. This brings a question from me. Can you explain what a data center does? There are so many being built, I've never really understood what data centers do. Perhaps after your answer, I might still have questions.
Thanks so much,--Robert P.
.
A. Hi Robert
 
Data centers are basically nondescript buildings that house computing power. Or more descriptively: Physical facilities or buildings that house a large group of networked computer servers, storage systems, and networking equipment used to store, process, and distribute digital information.

If you've seen the outside of one--there are many in Northern Virginia where I live--you probably would not be very impressed. I guess the way to describe it is that there is a lot more going on than meets the eye.
 
2:07
 
Q. Can you give me you thoughts on AB - AllianceBernstein Holding L.P. Limited Partnership Units? I know the div is variable, but do you think its safe? 9% has me a little intrigued but cautious at the same time.—Eric F.

A. Hi Eric

Alliance Bernstein is a business development corporation (BDC) that's been around for a while. What you're betting on isn't so much what the current asset mix is. Rather, it's management's ability to find investments that generate solid returns with manageable risks. The asset base as of mid-August was $909 billion--so it's pretty welldiversified and not going anywhere.

Q2 was solid with revenue up 5.1% and operating margin improving to 33% of revenue from 32.3% a year ago. That pushed up earnings per unit by 7.9% to 82 cents per share--which was also the amount of the
dividend paid.
2:08
I guess the most important thing about AB for an income investor is the dividend is going to vary--the payout for March 2025 was $1.05 per
share, August 2025 was just 76 cents. But they do pay out pretty much all earnings. So if you're willing to live with the variability, it's been a solid income vehicle.

I do prefer HA Sustainable (NYSE: HASI) in the BDC group because it's much more focused on a specific niche.

Q. Hey Roger, I keep getting drawn to MPT with the attractive dividend, positive articles, etc. But Im trying to keep my emotions out of it, and I'm waiting for your approval. Are we at a good bottom here near $4?--Eric
2:09
A, Hi Eric

Medical Properties Trust has faced two major challenges to its survival the past few years. First, it's been carrying a lot of debt leverage, which management rolled up when it was expanding rapidly. Second, many of its primary tenants have been increasingly strained to stay current on rents--and several have defaulted.

MPT has made progress cutting debt--including tapping private capital markets for a $2.4 bill debt refinancing earlier this month that
extended maturities. A lot of that has been from selling assets, some arguably at sub-optimal prices, with the result that debt/equity and other metrics are still elevated. And credit is still under pressure for medical tenants, as costs rise and government support wavers.

Bottom line: I think there are better REITs than MPT.
 
Q. Hi Roger,
 
Hard to believe that summer is winding down and hope it has been a reasonably relaxing one for you.
 
My initial observation, from my perspective, is that there has been an awful lot of circular financing chasing outcomes that are still largely unknown. Will there ultimately be enough demand to support the enormous amount of capital being committed to data centers? Will the anticipated demand for compute translate into revenues and returns at the rates currently projected? And will persistently higher interest rates — potentially compounded by continued deficit spending and heavy Treasury issuance — prove to be more than a speed bump in financing the anticipated buildout?
Tied to all of that, at what point do you begin to have concerns about entities such as BUI and HASI? Being somewhat of a realist (some would say cynic), I am beginning to wonder whether either is already discounting some of the "manna from heaven" projections Wall Street is famous for — particularly HASI, given
2:10
its role as an investor and provider of capital to energy and sustainable infrastructure projects. For BUI, my concern is less financial and more to those companies in the portfolio with exposure to infrastructure.
The state of the debt markets adds another layer of uncertainty. HASI's model depends, in part, on continued access to capital at economically attractive rates and on its ability to earn an adequate spread on that capital. When financing conditions tighten, what looks very attractive under one set of cost-of-capital assumptions can look considerably less so under another. And history has repeatedly demonstrated that it doesn't necessarily take a systemic credit problem to change lenders' risk appetites and cause financing conditions to tighten quickly.
As I see it, I may be early and would love to hear your thoughts here or in your comments in the next issue. Best regards,--Frank
 
 
A. Hi Frank
 
I don't see HA Sustainable (NYSE: HASI) as being particularly vulnerable to either potentially higher borrowing costs or a slowdown in data center construction.
 
The vast majority of investment (98%) is with investment grade counterparties. And there are multiple income streams, most of which having to do with energy efficiency to cut costs--which this latest fuel cost spike has greatly increased the appeal of.
 
The challenge for them as it is for every BDC is to find investments that can be financed at a cost well below returns. And as HASI's Q2 makes pretty clear, the added scale it's achieved in its niche combined with the investment grade balance sheet is creating more opportunity than ever. It's not a utility and every quarter brings challenges. But this stock is not expensive and I still see a great deal of upside.
2:14
As for the Blackrock Utilities Fund, the primary holdings are very large companies. I think some are expensive--which is one reason I like to buy individual companies. But I don't think the utilities, for example, are particularly exposed to a slow down in AI-related demand. In fact, management of many of these companies have appeared to welcome the moratoria on new data center development in states like Texas--as a way to catch up to demand growth. You're also protected in BUI as a closed-end fund that does not use debt leverage--there will be no forced liquidations of good assets at bad prices as has happened to other CEFs and can happen at ETFs and open end mutual funds when investors pull out.
2:15
OK that's all from the email queue. Let's get to the live ones.
Jimmy
2:27
should Vistra advance greatly once the third quarter earnings are known?
AvatarRoger Conrad
2:27
Hi Jimmy. I think that probably will depend on other factors than Q3 results, which are expected out in early November. Q2 results were very strong and guidance may be raised again if the Cogentrix purchase closes before the end of Q4. The company is winning power supply contracts and electricity demand in Texas is robust.

I think this stock is a good value at its current price. But I think near-term it will continue to trade in tandem with its close peers NRG and Constellation--which means it's likely to reflect optimism/pessimism for AI growth.
JT
2:29
Hi Elliott, what do you think of SGI's most recent earnings report?  Stock continues to perform poorly, and I believe you were giving it one more earnings report to prove itself.
AvatarElliott Gue
2:29
I think SGI's report was OK, slight beat, but it didn't get any credit in the market as we're back holding near the May lows.

SGI has been quite acquisitive over the past 18 months buying Mattress Firm and now LEG. So, I think a lot of the weakness is tied to concerns about how they integrate these deals plus the out-of-favor sector and group (retail + Mattress/furniture).

They have a business update call scheduled for September 2nd and, in my experience, managements usually use these calls to seal the strategic rationale for a deal. In addition, I still think we're going to see an epic bounce in long-bonds sooner rather than later as there are just too many bears in that market and the bear case is well known. So, bottom line, is I'll be watching the call next week.

More broadly, in the CW/FMS model portfolio, overall performance has been strong this year but we have two clear laggards SGI and RBA. My general strategy is to give a story time to work and then, failing that, I  generally look to trim
AvatarElliott Gue
2:29
losers. So, those two are on the chopping block right now. Also, we have some really big performers in there -- NTAP which I recommending taking some profits on earlier this month is one example. So, some of these big winners have become large weights in the portfolio now and so I might look to trim and take partial profits. I do have a couple of names I'm looking to add, but I may also sell more than i add and raise a bit of cash near-term as, sometimes September can be a little bit volatile.
Roy W.
2:33
Hi Roger,

In your last CUI you mentioned that utilities have produced evidence that that data center development reduces. costs on other ratepayers. How is that possible? With an upward sloping supply curve, an outward shift in demand raises average price.
AvatarRoger Conrad
2:33
Hi Roy. I think you have to make a distinction between the 35 states that still operate vertically integrated monopoly electric utilities--generation and T&D--and the 15 plus DC that "deregulated" in the 1990s.

For the past five years, rates in the 35 monopoly states--where electrics produce electricity--have risen below the national average. Rates in the other 15 are all above the average.

You're correct that in a "competitive" market for power--such as exists in the 15 deregulated states--rising demand from data centers has tightened supply and pushed up wholesale electricity prices by a lot. The T&D portion controlled by utilities has also risen with inflation. But the bulk of the increases people are seeing are due to those higher wholesale prices.

In a regulated state, the economics work differently. The combination of tariffs, inflation and higher for longer borrowing costs has pushed up project costs. And the fuel cost of natural gas is passed through to ratepayers directly.
AvatarRoger Conrad
2:36
Continuing on Roy's question--But in the regulated states, data center developers must sign contracts with utilities that are reviewed by regulators. And these are cutting costs in two ways: (1) The data center companies are contracting to pay for needed system upgrades, so the utility doesn't have to finance them and (2) System expansion increases the economics of scale.
2:37
Entergy Corp this week sited Amazon's revenue contributions in Louisiana as eliminating a $5 per month bill increase to its Mississippi customers. And it expects similar saving in Arkansas and Louisiana.
JT
2:39
Hi Elliott, can you give an update on RBA and what happened to the stock after its earnings?  Are the business issues and stock action have you worried about this position?
AvatarElliott Gue
2:39
The earnings were OK in my view. Company raised guidance and the auto side particularly looks solid. I think there were 2 issues. 1. Concern that though they raised revenue growth (Gross Transaction Volumes) they didn't boost earnings targets accordingly, which suggests some margin erosion. There's a good chance some of that is tied to cost inflation, which is a well-known headwind, but it's not what the market wanted to hear. 2. On the heavy equipment side, customers are more cautious. While expected to an extent, it does raise some concerns. As I mentioned a little earlier on in the chat, there are only two stocks in the model portfolio that are down this year -- SGI and RBA -- and they're both on the chopping block. My strategy is to give stocks some time to work out -- we were underwater in ANET, for example, and then it turned into a sizable winner. however, if a thesis isn't working out I'm inclined to cut and move on to new ideas.
AvatarRoger Conrad
2:39
I would argue the real problem with electricity rates is in the deregulated states--and could be solved simply by letting utilities produce power again through regulated rate base. I think we will see that happen in Pennsylvania in the near future. And as that's successful, others will adopt it as well.
John A.
2:44
What is the best way to combine gold upside with income? There are several CEF's and ETF's that purport to do that with attractive high yield that are not supportable because they are essentially return of capital, consuming your own cornseed type of investments.
AvatarRoger Conrad
2:44
Hi John. The company's percentage yield is currently less than 1%. But I continue to own Newmont Corp (NYSE: NEM) in the CUI Plus/CT Income Portfolio. The company generates massive free cash flow at $4K gold--and while it hasn't yet increased cash dividends much (4% this year to date), it is returning cash to shareholders with billions of stock buybacks every quarter. I think Barrick Mining (NYSE: ABX) offers similar value in gold mining.

I like Newmont and Barrick because they're actual companies growing earnings and shareholder value. And they're very liquid, which can't be said of many of the "gold" investments that offer these yields. Again, cash yields are basically what you'd get with an S&P 500 ETF. But they do provide great support to principal when inflation fears are eroding other dividend stocks.
Mike L.
2:53
I read all the time about how bods authorize buybacks and how beneficial that is for me, as a shareholder. (As opposed to dividend). 

I get the tax aspect- no taxable event.  It besides that, I don’t really see how my small piece of the ownership pie getting bigger really provides me w a tangible benefit. I apologize if this is a stupid question. But can you dumb it down for me? Thanks.
AvatarElliott Gue
2:53
Owning common stock (equity) gives you an ownership stake in the earnings and free cash flow generated by the business. So, let's say a company generates $1 billion in annual free cash flow and has 100 million shares outstanding -- that's $10 per share in free cash flow per year. If management buys back 10 million outstanding shares, then each remaining share generates $11.11 in free cash flow ($1 billion / 90 million). The tangible benefit would come through price appreciation (capital gains). Wall Street generally values a company based on a multiple i.e. XX times earnings or free cash flow per share. So if the multiple remains the same and the EPS or Free cash flow per share goes up, then the share price would rise accordingly. Another simpler way to look at it is that if a company is buying back its own stock, that's an additional marginal buyer for the stock in the market -- additional demand for a stock tends to drive up the price. In theory, there are 3 main ways a company can return capital to
AvatarElliott Gue
2:53
shareholders. 1. Dividends. 2. Buybacks and 3. Paying Down Debt. For the third piece, remember that bondholders have the first claim on a company's assets So, when you pay down debt, you are essentially transferring value from coeditors (bondholders, banks, etc) to shareholders.
DRG
2:54
Hi Roger / Elliott: 

The entire AI-infrastructure-buildout space is getting murkier as it faces a confluence of cross currents. While the flow of capital to the space is accelerating a multi-hundred-billion-dollar annual cadence (Nvidia/Wall Street consortiums, circular/vendor financing, hyperscaler capex), the physical build out process is hitting an increasingly organized wall of local/state resistance. Even though the likely outcome will be project delays, it nonetheless creates short term uncertainties in Wall Street. 

My question is twofold a) Which companies in the energy value-chain (E&P and mid-stream) are the likely beneficiaries as energy suppliers to the proposed
datacenters and have that reflected in their stock and `2) how will the uncertainties impact their stock prices in the short run and thus create opportunities for add on investment in those. Thanks.
AvatarRoger Conrad
2:54
Great question. I think there's good reason to doubt much of the proposed data centers capacity will ultimately get built. Local opposition is I think probably overstated--Virginia, for example, is the epicenter of data centers in the US and the government is still supporting development though with increased scrutiny. And a company like Amazon is able to push ahead with projects that are delayed--or if derailed it can just move to another area of the country. But I am fairly certain future AI will require less energy and quite possibly computing power--which will reduce the need for new data centers. And more marginal projects will be cancelled. The "circular financing" that's been well documented is also a vulnerability to the pace of development. And it looks like we're going to see at a minimum a more skeptical Congress and state governments.

The energy midstream companies I'm most comfortable with are those ramping up natural gas sales to utilities for power generation.
AvatarRoger Conrad
2:58
Midstream contracts with utilities are secure. And if data center electricity demand growth falters, utilities will use the additional supply to replace rapidly aging and increasingly expensive-to-run coal power plants with natural gas power. I'm increasingly concerned with midstreams selling gas directly to data center operators. These are contracts that could vanish, leaving developers with unused infrastructure. In my view, none of the midstreams we feature have this potential vulnerability.
3:00
I do think some midstream stocks--especially C-Corps like Williams Companies--have been bid up as AI plays. And they could sell off on any cooling of the theme. That's why I generally prefer the MLPs, which are heavily discounted to the C-Corps currently. South Bow Corp (TSX: SOBO, NYSE: SOBO) is an exception--though its more a bet on Canada's growth as an energy exporter to Asia.
Barry B
3:06
Good afternoon and thank you for all the great advice. I am concerned with the El Nino predictions of a much warmer winter. Should we trim some of our profits in EQT and EXE?
AvatarElliott Gue
3:06
My view is that it's already in the price and this is actually a good buying opportunity. Gas-focused producer like EXE and EQT were weak following last winter's extreme bout of cold due, in significant part, to expectations for a strong El Nino event this year that tends to lead to above-average temperatures across the northern half of the country during winter. The other factors that weighed were a bit earlier-than-expected start-up of the Hugh Brinson pipeline moving gas out of the Permian and  a pretty hefty maintenance schedule for LNG export terminals in May-June. The 2027 calendar strip for gas is probably the dominant fundamental to watch for now (this is the average price of all 12 monthly NYMEX futures contracts next year). We were up over $4 at one point on the '27 strip and now more like $3.30/MMBtu. We've seen a nice rally in both EQT and EXE since mid-June despite continued weakness in gas prices. Some of that is company specific -- strong EPS results from EQT and EXE's positive acquisition
AvatarElliott Gue
3:06
(outlined in the just-released issue of EIA). However, the most important thing I think is that the market got to a point that it priced in the El Nino risks. We're seeing upside because the outlook for late 2027/early 2028 looks much better due to factors such as a steady ramp in LNG exports, continued growth in electricity demand, strong growth in industrial demand.
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