Mr. Wright Goes to Venezuela
One of my favorite investment ideas has received an unexpected catalyst, with further potential upside ahead.
Chris Wright, the U.S. Energy Secretary, recently headed down to Venezuela for a first-hand assessment of the country’s oil industry, raising the prospects of increased oilfield activity and new drilling deals.
Wright’s visit comes as the U.S. administration continues easing sanctions and allowing foreign companies to operate in Venezuela’s oil sector. This follows reforms that opened the industry to private investment after more than two decades of state control.
One of my favorite investment ideas, which I first wrote about in “Cashing In on Gavin Newsom’s Presidential Ambitions – The Biggest Winner from California Energy Policy Moderation,” is an oilfield services company with upside from development in Venezuela. When I first wrote about the company, I didn’t even mention the Venezuelan aspect. Venezuela was “free” upside, and I published the article before Maduro’s capture and other recent developments in the country.
My thesis is straight down the middle. It is a well-run company, owned and controlled by world class capital allocators. It is substantially undervalued, with rapid debt paydown that could turn into buybacks and dividends soon. And cyclical headwinds are bottoming out and turning into tailwinds. These factors were driving outperformance before the recent Venezuela headlines, and now the increased Venezuelan upside have added an additional tailwind, sending the shares higher rapidly:
Even The Wall Street Journal picked up on potential Venezuelan oilfield services upside in their coverage, which I addressed in “The Wall Street Journal Featured One of My Ideas — Here’s What It Didn’t Cover.”
To be clear: I am not optimistic about oil production growth out of Venezuela in the near term, but this setup is attractive to me because my thesis can “work” regardless. If there is a meaningful uptick in Venezuelan activity, that’s bonus upside. If there isn’t, I think the stock will still outperform through debt reduction and valuation expansion.
If you’re interested in learning more about my thesis on this company and my other high conviction stock ideas, consider subscribing today to take advantage of the limited-time 45% discount to celebrate Bison Insights reaching 1,000 paid subscribers.
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Disclaimer: This is for informational and educational purposes only. This is not an offer, solicitation, or investment recommendation. Please consult an advisor and do your own diligence. Past performance may not repeat itself.
