Narrative Update
Inside Rob's Brain
I read a lot of Street Research, company transcripts, SEC filings and fintwit, although I have narrowed down my X viewing to a select group of accounts who really do terrific critical thinking and analysis to drown out the pumpers and bots. This is how I stay on top of the “narratives” moving stocks and sectors. Sometimes I believe in the narrative and can ride the names. Other times I want to fade the narrative or pass altogether. For example, I missed in the past week the long BTC miners as they tell their stories of transitioning to HPC AI services. Core Scientific, CORZ, started the frenzy with a 12 year, $290 million annual revenues deal with often suspect company Coreweave. As you know, I debunked the “sinister” Coreweave/NVDA story months in the substack. CORZ stock went bananas doubling from $4 to 8 so, of course, I had to look under the covers. Analytically, I cannot tell the economics to CORZ from the Coreweave deal. Nor can I find other public BTC miners with similar aspirations laying out the economics of hosting or becoming a GPU as a service. At the moment, it seems like Coreweave is mostly locking up high performance energy/electricity contracts the miners “own”. So, I will keep digging, possibly trading the long narrative on dips, but ultimately would like to understand the business model before taking a real position.
Hence, not a strong enough narrative for my likings at the moment. But, the drop in the electric producers like CEG (Constellation Energy) and VST (Vistra) caught my eye falling about 20% from their highs after mammoth moves in 2024. Gosh, are utilities no longer traded versus interest rates and have a growth story to them? Yes. VST is the one I will focus on here as it made the most sense to me to start buying and trading long from here:
Enterprise value of $48 billion. EBITDA of $5.25b in 2025 or 9.5x multiple. Buying back $2.25 combined in 2024-2025 versus an equity market cap of $29.5 billion or 10% or the shares outstanding. Buybacks since 2021 have reduced the share count by 28% in total! Nearly $1 in annual dividends (small but…) Mostly unregulated energy/electricity Texas-based and exposed to spot pricing with a good mix of hedges in place to ensure EBITDA projections. Sell-side buy in with price targets above $100. Lastly, hedge fund support from Lone Pine, Coatue and Citadel, a “good” hedge fund hotel to buy on pullbacks. FCF $2.5 billion for 2024.
Check out their latest presentation here. VST updated Guidance
That is how narratives work. You can be early, late or right in the middle of the narrative. Find the triggers that get you involved or wait for the entry that makes sense to you. Passed on the BTC miners as more than quick trades but digging in on the VST story.
So, let’s get inside Rob’s brain for the low price of your substack subscription which is donated to charity btw. This is where my narratives list and thought processes on the current market as we enter the second week of June. Feel free to respond, add or suggest other views or narratives I am not seeing. Here goes: