Smart Investors Buying Vistra (VST stock)? Nancy Pelosi, David Tepper, Ray Dalio! Recession Proof?

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Vistra(VST)를 노르웨이 국부펀드, Appaloosa(David Tepper), Bridgewater(Ray Dalio) 등 스마트머니가 4분기 매수했다는 점을 소개. 데이터센터발 전력수요 증가(2024~2030년 약 55GW 추가 수요 전망)로 성장 기대, 조정 FCF 약 36억 달러 전망 대비 시총 약 460억 달러로 밸류에이션 부담 낮다고 평가. 자사주 매입 약 50억 달러, 배당 증가 언급. 다만 2021년 텍사스 한파 손실(약 16억 달러)과 Moss Landing 배터리 화재 등 실행 리스크 지적. 10~15배 밸류 가정 시 약 2배(5년) 상승 시나리오 제시.

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01. recently several shrewd investors have been buying vistra stock VST is the ticker in this video I'm going to walk you through why I think they've recently been buying it sort of what's the secular growth trends that these smart investors see where the stock potentially go in the years ahead what did they even do I'm going to cover that and more in this video if you enjoy educational investment content please make a point of hitting that Thumbs Up Hit That subscribe button my name is Daniel you're watching unrivaled investing let's Dive Right In so previously I did a video on how Congresswoman Nancy Pelosi was buying Tempest AI stock this is an AI medical related healthc care type of company that was growing quite quickly now interestingly enough at the time of this this disclosure where she was buying around $100,000 of Tempest stock she was buying significantly more vistra around you know half a million to a million dollars in that position so this put it on my watch list of things that I want to learn more about and you know subsequently subsequent to that video and subsequent to her making that purchase Tempest has gone up between 100 and 200% it's it's lost a little bit since then so it's still up around 80% but vistra has actually been treading water and is now down about 20% and I also see that several shrewd investors during the fourth quarter were aggressively buying shares you have noris bank I believe this is The Sovereign wealth fund for Norway you have David teers Appaloosa he was buying he more than doubled his position that's around a $400 million position you have Ray Doo's Bridgewater making it a quarter of a billion dollar bet so a lot of you know smart shrewd investors picking up shares I want to understand sort of what's the story here uh so first of all in understanding vistra they talk about being a leading leading integrated power provider so they're providing power for approximately 5 million residential commercial and Industrial customers they have about uh they they're in about 18 different states looking at 40 1,000 megaw of power generation and they also operate the second largest competitive nuclear power Fleet however when you look at what they're actually using to generate the power the vast majority is natural gas that's over 50% the other is coal which is around 20% so not quite in the the renewable energy space this is you know coal and that gas really driving the energy for this leading integrated power producer um 5 million families and they are sort of at that crossroads or 5 million businesses or or households they are at that crossroads for society to understand that there's a real challenge here because if you're looking to power 200,000 homes uh they they sort of make the point look there's there's a couple ways to do it one choice is a th000 megawatt modern gas plant which takes up around 110 acres or you talk about how you know you you're sort of driven by a a wind solar Plus Battery agenda you want this you you want to push for Renewables but in order to consistently reliably power that same 200,000 families you would need a lot more megawatts you know just to cover it from a reliability perspective in which case this same sort of usage the same usage for that 200,000 homes quickly expands to needing 9,000 megawatts of renewable energy uh combined across wind solar and battery and the the acreage is like 1,300 times the size that you would need just from a modern gas plant so this sort of is the societal Crossroads where we're saying well it would be nice to have Renewables but you know it's not really as efficient as what you're talking about with these gas plans you know and and that doesn't even talk about you know the cost for the incremental cost for the transmission lines that are required with all of this so you know this is the reason why folks are saying well vistra is providing the realistic relevant solution to today which is unfortunately predominantly Nat gas and coal driving the energy for vistra now what's causing some shrewd investors to get interested is this is no longer sort of the low growth let's say growing 1% a year type of Industry because there is an expected significant uptick in energy demands primarily from us data centers so think about the AI Revolution where they're saying between 2024 and 2030 there's going to be an extra need for 55 GW of energy tied to this you know this AI is just very hungry for for for energy you know to power these plants these data centers and so they have started seeing this real uptick and they are saying look in the years ahead we don't think it'll really be at that you know let's say below 1% probably you're going to see demand closer to single digits you know maybe up to 5% in the years ahead so that's the forecasted energy needs um you know for that vistra is looking at and then when you factor in the expected retirement of various different thermal generation you know you're talking about a huge gigawatt potential Supply Gap because you have this growth in expected demand but then you also have the expected retirements by 2030 so huge supply gaps you know depending on which Market you're looking at and you know they're trying to play their part and addressing this and so in 2024 they talked about 4 gaw of announced either capacity expansion or additions and this is spread out across the United States you know in Texas Illinois California you know dealing with various different projects whether or not it's coal to gas or gas peer plants or solar and battery so they're trying to do their part in addressing what could be a very sizable shortfall but with scarcity with shortfalls they are expecting look we are we are clearly investing in the energy infrastructure space we're expecting a reasonable return on investment thus we're expecting continued growth and you you can see how their long-term earnings Outlook has improved over time from around $3 billion in eida in 2022 to around 5 billion in 2024 to 6 billion expected in 2026 $6 billion plus and they're expecting a significant percentage of that to translate into free cash flow so they're saying they're adjusted free cash flow before growth initiatives so before they're making their reinvestments into you know plant expansions Etc they're saying yeah our free cash flow might be around three billion to $3.6 billion in the years ahead and when you think about that 3 billion 3.6 billion versus let's say a current market cap around 46 billion that's not crazy expensive I mean the S&P 500's trading around 25 times 24 times so you you have a significant discount relative to the S&P 500 trading at it let's say a teens earnings multiple now you're not going to get hyper growth from a utility company and that's what they are but you are getting I argue you know around a fair valuation or an interesting valuation it's not it's not crazy dirt cheap but it's also not crazy expensive and so what are they doing with that free cash flow that $3 billion in free cash flow well the vast majority of it actually goes back into their organic you know growth Investments the plants that I already talked about but they have been reinvesting it with shareholders let's say a billion dollars plus you know in buyback so they've talked about executing nearly $5 billion in share repurchases from November 2021 through February 25 and they did it at better prices than were currently trades at an average price of $30 and then they talk about you know not only did we significally reduce shares but as we reduce shares the dividend per share naturally goes up and by the way you know they're trying to keep their trying to pay down their debt or keep their debt at a reasonable Level under three times net debt to eida you know which is which is a you know relatively safe I would think metric you know very you know utilities are very rinse and rinse and repeat types of businesses or at least that's what you hope and by the way they're also investing in sort of some of the more sustainable or green energy initiatives including some nuclear bets solar and um energy storage you know Investments as well so to sort of balance out the picture now what are my thoughts on vistra going forward recognizing that you have these super shrew investors buying it and it seems like a reasonable valuation nd also quick plug earlier this week Sam this is a direct quote this was on our exclusive Discord server so you can see it yourself if you sign up Sam wrote Daniel just re up my annual subscription after one year of being in the community this subscription has paid for itself many times over there's no doubt it is a worthwhile investment I'm 20 years old sophomore Finance econ major and can confidently say I have learned more about investing and analyzing companies from your videos in this community than I have in the classroom so far looking forward to another year I AB absolutely love to hear it Sam and I frankly I'm I'm grateful for the community at unravel investing because you have folks like Sam who's a you know college student you have folks you know that reach out say hey I I retired early thanks to unrivaled investing so it out that's unrivaled investing.com I think the reason why several shrewd investors are looking at vistra is they're looking at the macro they're you know they're they're sort of saying well oftentimes with investing you know Ray doio sort of made the point what is what is the government telling you that they're going to do and then sort of lean into it or move ahead of them try to effectively front run the government that's that's sort of high level what what Dio has talked about where you know if they talk about you know very friendly monetary policy okay get aggressive on risk assets if they talk about you know pain and challenges ahead okay then take some risk off the table so when you see a treasury secretary Scott Besson saying yeah the private sector has been in a recession it's been mismanaged you or or the public sector has been Mis manage because of overspending and so now we need to get the private sector to start expanding so clearly this is not a a mega Bull type of comment this is saying we got some short-term pain you know to to fix as we you know leave and exit significant you know overex ere expenditures from the public sector and the government you know doing six to 7% you know deficits and then you have the president saying yeah there there's going to be these tariffs it might cause some short-term pain but it'll be worth it so when you you have you know the the the government the US government saying yeah expect short-term pain well it's only been a couple of weeks short-term pain usually plays out over a couple of quarters you know possibly a year or two so it is important to recognize that there's there's you have the US government saying pain that's you know may maybe you know you can have some sort of private you know expansion that's offsetting the public sector but that would be extremely hard and the amount of cuts that you know that they're aiming for to you know let's say balance a budget that would have a huge impact on the US economy so that is important to understand especially from the context of vistra is a utility type of company so they are more insulated from those types of economic shocks and risks like you have people aren't going to say oh yeah I'm not going to pay my electricity bill this month generally that's not what happens they they say okay I'm not going to go pick up that luxury good or buy this discretionary item and that's more the Brun electricity stays on you got to keep the power on so utilities generally are more insulated from that economic potential pain so I think that's why you're seeing these VAR various different shrewd investors whether or not it's politicians uh Sovereign wealth funds you know Mega funds Mega one the largest hedge fund in the world shrewd investment funds so I I think that's the reason why they're saying okay pain potentially in 2025 growth slowdown why not buy some utilities at a reasonable value you know at at around 15 times you know forward you know free cash flow adjusted free cash flow figure so that's that's at least I think the logic that's behind it now I'm going to run it through my own personal checklist to figure out if it's appropriate for my own investment journey I have very straightforward checklist because frankly you keep it simple and it weeds out 90% plus of the companies out there so looking at it I would say let's we we need to go through the Align management part the valuation I would say is reasonable is you know you're talking about a teens type of valuation the growth potential does strike me as obvious it's not high growth potential but I would say it's it's it is obvious growth potential you're probably talking about you know you know 5 10% type of growth as they're reinvesting in terms of their various different you know organic projects expansion um blowup risks we'll talk about in a second win-win obviously as they you know expand maybe the cost of energy go down consumers actively use it so I I I I view this as it's interesting but let let's go through some of these details so first of all it's important to understand yes utilities are supposed to be very stable businesses but there are they are susceptible to real executional hiccups and vistra you know has a long history previously it was through another organization that went bankrupt and vistra is now its current form but look just a few years ago during a harsh winter in Texas you know it resulted in a freeze cost of around $1.6 billion that cut their profitability nearly in half for the year and that was just you know sort of one big incident that significantly impacted their results uh so that's you know one aspect more recently you know in Moss I think it's Moss Landing in California where they have this is once again vistra they have the largest battery energy storage system in the world it caught fire leading to the evacuation of 1,500 residents this was just earlier this year and so you know when I see these instances and this this instance might cost them you know like a half a billion dollarss you know I look at this and you know execution really I would say I I do not like to see those instances now I'm I'm I'm sure I could you know find more if I were to keep digging but those types of things make me uncomfortable thaning about it um you know it's so it's yes utilities should be very stable but it does assume from an execution perspective that you don't have like hey a bunch of lithium Ox lithium batteries you know causing a ha you know a Hazmat issue for you know thousands of residents and where they could be you know who knows how long that they're you know uh relocated so you have that type of you know development um you know you want to make sure you don't have big snafus from a so that that is I would argue the blowup risk is could you have you know something else like that where you wake up and go oh my gosh this is really unpleasant so that's that's one element the next element is management alignment the CEO he has shares around two million shares based on the current share price even though it's down a bit today that's worth around $200 million versus annual compensation of around 8 to10 million personally that I I do view that as a line but I and he's been with the company through I think their prior bankruptcy and their new Evolution so I I look at that and personally from my journey I I prefer just sort of founder-led businesses because I think with Founders they just it's their life work oftentimes so when it's your it's when it's your baby you I I feel like the Moss Landing fires and the issues like they had with with Texas in 2021 I just feel like issues happen less often when you truly own it like when you're sleeping about it and you're thinking about it and you're like this is my life's work I need to make sure it's good um so I I think the the financial alignment is there I just prefer founders personally um or someone that owns just a crazy amount of stock so it's not like he owns a lot of stock but it is worth a lot what he owns you know it's not like it's 1% of the company um now thinking about the valuation and where does it potentially go in the years ahead so Management's guiding to effectively around 3.6 billion in adjusted free cash flow in 2026 because they're saying 6 billion plus in eida and that Eid do converts to 55 to 60% um you know into that adjusted free cash flow now let's assume the majority of that 3.6 gets put back into gigawatt expansion or effectively organic growth for this you know new projects expansions extensions so maybe you see 5 to 10% type of growth per year and the question is well what's that worth if you're talking about you know 5 to 10% now of course this is a hypothetical framework that I'm I'm sort of walking through but let's let's talk about it if you if you say in like let's say the most favorable outcome 10% organic growth because they're investing billions of dollars into new new projects each year growing their gigawatts so 10% type of earnings growth their earnings power then assume you know they take a billion dollars in free cash flow buy back shares so now you're at you know that's another percentage or two that you can add on top of that organic growth of let's say 10% and then throw in a little under a 1% dividend so you're talking about a teens type of return to you as a shareholder over time and that's regardless of whether or not you have that type of harsh economic recessionary type of development that I was just talking about that the government's fly warning you about so you know low teens type of earnings potential and assuming the no valuation change now you're talking about roughly a double over five years if you're able to get you know around 15% growth over time maybe a little bit under that and then if you have some sort of expansion because investors go wow you know this is this this type of business is doing well through thick and thin whether or not it's recession or you know economic expansion because you know the AI needs that energy maybe you do get a little multiple expansion as well and so it goes from 15 times to 20 times and you get that or earnings growth you know in that type of scenario then you could say okay maybe maybe the upside from here is you know 100 to 150% upside so maybe it's closer to like $300 per share of course this is hypothetical stock price can go higher or lower I'm just sort of sharing the thought process on how this could play out so I I think I understand why these shrewd investors are buying it which is insulated from economic shocks and volatility they are susceptible now to that you know execution risks but it's not at a crazy valuation and if you're worried about let's say the market being expensive plus economic shocks then you're relatively protected at you know a te teens type of earnings multiple plus you have that secular demand for energy plus you have the potential that maybe it does rate TO a higher multiple in the future plus you have management that does own you know I'd say enough to keep them financially incentivized to say hey we are going to continue to execute and grow going forward if you enjoyed this video talking about vistra why I think these smart investors have been buying shares please make a point of hitting that Thumbs Up Hit That subscribe button thanks so much for watching unrivaled investing