The energy sector has been in transition for years… moving from fossil fuels to cleaner sources of power.

But right now, energy providers are scrambling thanks to Russia’s war in Ukraine.

That’s created a surprising winner in the sector.

Plus, there’s added urgency to this play – and the potential for big short-term gains – thanks to the push for greener energy over the long term.

Get all the details on the stock – including the ticker – in this week’s Stock of the Week.

Click on the image below to watch it.

And let me know which stocks you’d like to see me analyze by sending an email to mailbag@manwardpress.com.

Transcript

Welcome, everyone, to another Stock of the Week.

Now, just a reminder, the reason I do these is to give everybody an understanding of how we in the hedge fund industry – and certainly in my fund – we analyze and investigate stocks. So it’s a sort of a tip of the iceberg.

I’m Alpesh Patel, CEO of a hedge fund. And what we do in my GVI Investor research service is go into far more detail and analysis thanks to my team of researchers as well.

So let’s start off with this week’s Stock of the Week. And the snippet, this one is Consol Energy (CEIX). And you might think, “What the heck, Alpesh? Have you not been listening to the debates on climate and so on?” Because this is a coal exporter. They’ve got some 612 million tons of coal reserves. The company was founded in 1860. So you might say, “Look, it’s from another millennium. What on earth are you doing?”

Don’t forget, we look to pick stocks for 12 months, okay. We’re looking to pick them for 12 months, analyze them over that period, hold them on probation and then look to exit. And this is done on the basis that there’s an energy crisis at the moment. There’s a cost of living crisis at the moment because of what’s happening in Ukraine… because of gas and oil reserves… shortages… It means that people are having to heat up their homes and switch the sources of energy.

And before even that happened, this company was already benefiting. Up 200%, up 108%. And it’s partly a function of the fact that even if you take Russia and the Ukraine conflict out of this, there’s only a limited amount of time in which to use coal. The trend is – most certainly in the commitments from countries like India and China – is very much to cut back on the extraction and use of coal. Those commitments were made at COP26 (the United Nations Climate Change Conference), but they are long time ahead.

But it also means that there’s an acceleration to get that coal out of the ground, use it whilst we can and then we’re going to go green. You might say, “Well, I think we should go green from day one.” It isn’t going to happen on day one. There’s a transition period. And a company like this is benefiting from it.

Several things it’s benefiting from… and don’t forget, they’re keeping the houses warm… well my house, mine’s well insulated and all the rest of it, and I’m sure yours is… There’s the poor, there’s the elderly there’s all of the people who have no choice. They don’t have the privilege of saying, “Oh I’ll just use green energy from my solar farm out back.” They don’t have any of those choices.

And the things which have really attracted me about this company are cash… the amount of cash return on the capital they invest – 7.8%, the CROCI number in other words, which you’ll remember is one which I’ve taken from Goldman Sachs Wealth Management and Deutsche Bank Wealth Management. They use it for their wealthiest clients, they worked out that the companies with the highest CROCIs tend to do the best.

The price returns, you’ve seen, have been rather good. It’s been outperforming the market.

Volatility is a bit high, but that’s because it’s been shooting up so much.

On a value-growth-income basis, which is my measure of my proprietary algorithm of looking at the valuation of a company, its profitability relative to share price, revenue growth, cash flow growth… these kinds of factors… momentum… It’s a 7 out of 10, which is good. Because I want 7s, 8s and 9s.

Looking at the broader figures over here… Yeah, turnover pretty flat. At least borrowing’s going down. Profits… you might say, “What on earth, Alpesh? The profits don’t seem to be going in the right direction.” Well, in actual fact, the stock price is going in the right direction.

Total assets… holding steady on this one. Yes, there is borrowing to get that coal out, expend the capital. And they’re generating cash flow, so I’m not too worried. Now, the main concern I’d give you on this one is – don’t forget, it’s a Stock of the Week, not one of my stock picks in my GVI Investor research service, so this is more to give you an insight into how we look at things – but the one thing I’d tell you with this Stock of the Week is don’t forget it’s gone up a lot, which is why we have a time limit on holding things of 12 months… and then reviewing and so forth.

So hopefully you found this interesting, you’ve got an understanding of how I and my team look at investing and look at stocks.

Thank you very much.