Sugaree wrote: Let’s discuss Nuvista. Not a stranger to Eric Nuttall at all. In fact, Nuvista has been in the fund for over 2 years now. Left the top 10 briefly, but never the fund. He even mentioned on BNN recently he regretted selling some off and that one can’t win every bet.
What makes the additional purchases to regain a top 10 position so significant, is that Nuvista breaks 3 of the 4 tenants of Eric’s current investment thesis. Use Cash Flow to: 1) Pay down debt. 2) Share buybacks. 3) Dividends. 4) No growth. Nuvista is only adhering to the first one. In fact, they plan to grow a whopping 30% in 2022, and 20%+ in 2023. Growth will literally go up 100% from the bottom of 45k+ boed in 2020 to 90k+ boed in a 4 year span.
Why is Nuvista shunning the new industry norm? Well, they have an already paid, virtually brand new facility to accommodate up to 110k boed. As they increase production, cost per barrel drops significantly. From beginning of 2020 to end of 2023 there will be the equivalent of 2 Nuvista’s of Cash Flow with greatly improved 25+% efficiencies.
In any other industry, if you were offered a stock trading at 1.7x EV/CF 2 years out and 2.9x in 1 year, approximately $315mm+ FCF 2022, $380m+ 2023, $450m 2024 with 30% YoY annual production growth, would you not be buying hand over fist and holding on to it for dear life, lol? In December, Eric called for the stock to double ($6.23 at the time) in a year to year and a half out.
These are just a fraction of the reasons Nuvista was the #1 stock performer in Canada (maybe USA too) in 2021, at 640%. Nuvista is breaking the most important rule in Eric’s thesis (no growth), yet it is such a gem of a company he is not only willing to hold on to it, but buy more recently, elevating back into the top 10.
A handful of O&G stocks have recently broke through their 52 week highs, most including Nuvista are still in consolidation mode. Once it breaks $7.49 on a close, look out above, the train will have left the station.