Eric Nuttall

People need a reality check. His fund is up just under 20% right now, almost quadrupling the broader TSX, and almost matching NASDAQ. Energy stocks are working and winning. For global oil inventories, the deficit to normal levels just hit an all-time low, which means bullish for price, continuing through this year. Demand is beating bearish expectations. 

People don't appreciate how unbelievably profitable companies are today, and how much free cashflow is being generated. Oil is at $83 right now. We don't need the oil price to go up any further from here for these companies and stocks to do spectacularly well.

The path for stocks to continue to do well relies on buybacks. We're seeing record share buybacks. Seems to be skepticism around this. Most companies have a very heavy spend at the beginning of the year. In Q2, 3 and 4, they harvest that free cashflow, and that's what we're seeing. Take BTE, which he thinks can buy back 10% of stock outstanding over the next 6 months using just half of its free cashflow. There are multiple examples of that.

He remains bullish on oil, likely to be at $80 oil on average through 2025, and triple digits beyond that. An environment that's stronger than what consensus believes. OPEC should be able to return all its discretionary barrels to market, which can reabsorb them, despite mediocre demand growth forecast for 2025, and without being price disruptive.

The sector's trading at a 14% free cashflow yield, and most companies are giving all of that, or most of it, back to shareholders in the form of buybacks. The ongoing buyback of shares and retiring them will eventually force share prices to go up. Balance sheets have never been stronger, free cashflow never higher.

The generalist investor is waking up, very slowly, to the attraction of the energy sector. We're still in an environment where people buy into the false narrative that we're in this rapid transition. The whole narrative is crumbling before our eyes. Look at Volkswagen this morning saying it might have to shut a factory due to slowing demand for EVs. A McKinsey report said that half of Americans who bought an EV are going to go back to gasoline next purchase.

Well run. But it's a small cap, and that's just not where investor focus is, so sentiment is not behind it. Good exposure to heavy oil, phenomenally profitable now. Great yield of 6.9%. Strong balance sheet. Trades inexpensively.

Concern that it's going to be active in M&A, which creates an overhang on the stock, so it's not appealing. Recently sold mid-stream assets, will use proceeds for share buybacks.

If you're looking for good exposure to the commodity, with a higher yield, he'd recommend this one. Yield is 7.8%, extremely sustainable at current prices. Very good exposure to oil and nat gas, without taking on capex and exploration risk.

Likes it, owns a little. Trades at 3.5x cashflow, big enough scale. Good capital appreciation prospects.

Not a name he'd own. Sell, and buy either FRU for the dividend or CHRD for capital appreciation.

No. He deployed his cash quite a while ago, anticipating a selloff. He's down to 2% cash as of this morning (maintained for any client redemptions). So he is, essentially, fully invested.

Suffered from poor performance due to being aggressive acquirer, a lot of stock was issued and had to be absorbed. 

He continues to hold with a 7-7.5% weight. Quality assets, though may have overpaid, but that's in the past. Deleveraging so that more free cash can be returned to shareholders; investors get half of it right now, goal is 75%. Well over 10 years of inventory. 10% free cashflow yield is reasonable. Ticks all the boxes.

Disappointing laggard. But sees profound value disconnect between where stock's trading and where it should be. The Q1 heavy spend is done. Now buying back shares aggressively with half of free cashflow, and this should set it up to outperform; rest of free cashflow is being used to pay down debt. Yield is 2%.

Some of the highest-quality Montney acreage. Oily, nat gas exposure. Growing production by about 50%. Trades at a 15% forward free cashflow yield, 75% going to investors, expected to go to 100% (making a 22% free cashflow yield). His target price is $22.50. No dividend.

Modest multiple. Trades today at 22-23% free cashflow yield at modest activity levels; forward free cashflow yield of 26%. Offers strong optionality for better activity levels in 2025, predicated on higher nat gas price. No interest in services right now, so that's one of the best value propositions. No dividend.

He's bullish on natural gas for next year, though not now because of bloated storage and too-high US production. Suffers from challenges of a smaller company, just not hitting the radar screens. See his Top Picks.

Biggest metric he looks at is free cashflow yield at $80 oil, $4 natural gas, $12.50 WCS differential in 2025. He then looks at how many years of inventory a company has. What are other catalysts? 

Then look at what the target free cashflow yield should be, and this is tough to figure out. In the past, he'd have said 10%, but US companies are trading at 6-8%, and Canadian companies are better. Shale companies are challenged, and this is becoming more obvious. He thinks Canadian companies will trade at a premium to US companies. So now he thinks an 8% free cashflow yield, getting it back via buybacks or dividends.

Then he can get a theoretical target price on every company he models.

Right now, he's very bullish on oil, especially heavy oil. Bullish, long-term, on natural gas. Quite bullish on services, especially drillers.