Stock price when the opinion was issued
Just bought it. The energy in pullback was overdone. FANG offers secular growth, making good, strategic acquisitions and want to distribute 75% of their cash flow to investors through dividends and buybacks, plus a variable dividend. She bought around $139. China is not yet reflected in energy stocks, and today Russia announced energy output cuts.
FANG is $42B market cap now, down 13% YTD and down 29% in a year, trading at 10.4X earnings with a 2.80% dividend (raised 11% in February). The balance sheet has some debt, but not a concerning amount. The sector is no one's favourite right now, with weakening oil prices. But we note the valuation reflects this, its last quarter was good, and estimates have been moving higher recently. Still, consensus calls for lower earnings this year and lower earnings next year. Thus it is hard to get too excited on it right now. We think its time will come, but we need to see better commodity pricing (preferred) or at least better investor sentiment. We would rate it a HOLD for now.
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Has a 11% free cash flow yield. WTI is about to hit its 50-day moving average at $83. Sell the March $160 calls; 5 months out you get 5% income and 15% total return if it gets called away.