Eric Nuttall

Complete elimination of any political risk premium that was in the oil price. About 2 months ago, he started getting far too many interview questions about whether oil was going to hit $100. As a contrarian that made him nervous, so he raised quite a bit of cash (about 33%). And he's been actively spending that given the selloff.

Heading into a key OPEC meeting in a few weeks. His best read on the situation is that they'll extend the voluntary cuts through to the end of this year. Still concerns about a weak China, whether the Fed will cut or not, and how is the US consumer holding up. That means sharper than average inventory draws beginning next month. 

Given these headwinds plus seasonal weakness, high $70s is pretty good. Energy is up 20% YTD. As we look to the second half of this year, sees demand seasonally increasing, OPEC continuing cuts. Falling inventories are bullish for oil. Possibility of $90 Brent by end of 2024.

Bullish heading into 2025. LNG Canada starting to ramp up and will start taking nat gas in the next month or so. Outlook remains solid.

Weekly numbers that come out are typically of low quality. Last year, underestimated US demand by 400K barrels a day. So he waits for the monthly numbers and wouldn't be surprised to see an upward revision. 

No tangible evidence that the consumer is faltering. We hear all these stories about trade downs to Walmart and people buying fewer Big Macs, but if you look at miles driven, the consumer seems fine. Demand is not shooting the lights out, but it's fine.

He still sees enduring religion of returning free cashflow to investors, irrespective of tax changes. It's likely that people will do some estate planning by the deadline and take some gains off the table. But he doesn't see the impact occurring on share buybacks.

Right now companies are awash in free cashflow, not meaningfully growing, and paying down debt. There's really nothing to do with that cash except give it back in the form of dividends or buybacks. Investors very clearly want share buybacks.

We've had a bit of a rerating. Stocks aren't trading at 2x cashflow, now more like 10-12x free cashflow yield. Still sees meaningful upside at $80 oil and $4 gas. Real power in the next couple of years is the compounding effect of buying back 10-15% of outstanding shares every year. Three to four years from now, the remaining shares will be so much more valuable.

Some people own it for M&A takeover potential. He doesn't like to do that. It's a market where interest in small caps remains very low. Not hitting enough radar screens currently. Pursuing growth, so more modest cashflow. 

One of his top holdings, a 9.5% weighting. At least 20 years of high-quality inventory. Proven ability to successfully execute. A 10% free cashflow yield at $80 oil is about a $19.57 target price, 70% upside from here.

Deeply out of favour. Active doing M&A, created an overhang. Timing and quality of assets purchased was very good.

Can't find any negative comments on its assets. May have overpaid slightly for its most recent purchase, but very high quality. Hit numbers for 2 quarters in a row, so his confidence in execution is increasing. 20% free cashflow yield. Needs to pay down debt, and then 75% of free cashflow can return to shareholders. He trimmed recently, from a 10% position to 6.5%. Implied price target is almost $7. Share price is getting increasingly attractive.

One of the highest-quality names you can buy to get access to a bullish natural gas outlook for 2025. He has about a 5% weighting. Provides ballast to a portfolio to counteract volatility of smaller names.

Rock star CEO, very good management team, huge inside ownership, decades and decades of drilling inventory, very good gas marketing teams. 9.2% free cashflow yield. Target of $93, or 36% upside.

Personally, he likes to buy when others do not. He likes panic and fear. Be greedy when others are fearful. The best buys are when you're sick to your stomach. That's not the case today.

When there was so much going on geopolitically and there was euphoria in oil, that was not the time to be deploying capital. Huge premium risk to the oil price, and you could wake up one morning with oil down $5.

Where global oil inventories are today, there's no risk premium in the oil price. He's bullish on oil, so that makes him want to deploy capital. He's gone from 33% cash weight to about 10.5%. Now actively spending.

What to buy? You could buy oil names. The valuation gap between large cap and small is the widest in history. The large guys are trading at such a massive premium, and the small guys are at a discount. It's an inefficient market and there's not as much interest in small caps. You'd think that would make you want to buy large caps, but he's a contrarian.

He sees opportunity in small- and mid-cap stocks, as long as you have asset quality and a management team you can trust. Also free cashflow will allow for meaningful share buybacks. There's always a bit of hair to the story, so you need to figure out if it's a mispriced stock (a catalyst will drive the rerating) or a value trap (stays cheap forever).

Right-sized the dividend by 50%, which alienated a lot of investors. The base dividend should never be cut, and most quality companies will base that on a very low, defendable oil price. 19% free cashflow yield. Value trap. Can't see a catalyst.

Debt reduction taking longer. Should hit debt target in July/August, give or take. Will then pivot to 100% free cashflow back to shareholders. Doesn't see increase in dividend. Trades at discount to peers. Target of $43, 58% upside. His favourite large cap, about 9.5% weighting.

Large selloff recently after a momentum frenzy in the sector, he added. Now about a 5.5% weight for him. Targets $11 price, 51% upside. Yield is 5.5%, which will grow over time.

Underperformed the index. Sold it from his main fund. Kept it in his income fund, as dividend is very dependable. Perception of relentless M&A, investors are tired of this, creates overhang. A $15 price is reasonable. Yield is 7%. 

Better opportunities elsewhere for capital appreciation.

He's been buying other small nat gas names. Cut dividend, a good thing because they were using debt to fund it. Next year, payout ratio should drop to 73% with $4 gas, a lot more defendable. Concerns about debt, takeaway capacity, and CEO succession. Cleaner names elsewhere. Yield is 6.7%.

LNG Canada will be the next catalyst. Be patient. With Paramount as primary shareholder, concern that it could sell any day and drag share price down. He's the second-largest shareholder. 75% of free cashflow being used for buybacks. Target of $23, 78% potential upside.