7. Vistra Corp. (NYSE:VST)
Market Capitalization as of September 13: $29.28 billion
Number of Hedge Fund Holders: 92
Vistra Corp. (NYSE:VST) is a Fortune 500 integrated retail electricity and power generation company that owns and operates diverse power plants, including coal, natural gas, nuclear, and renewable energy sources. It also provides energy delivery services, including transmission and distribution to deliver reliable and affordable energy to its customers while reducing environmental impact.
Earlier this year, it finalized the acquisition of Energy Harbor, enhancing its presence in the nuclear energy sector. With nuclear assets, the company can take advantage of the increasing demand for electricity driven by AI, as major hyperscalers enter into contracts with nuclear energy providers for low-cost alternative fuels.
It also commenced the construction of 2 new solar projects: a 200 MW facility backed by Amazon in Texas and a 405 MW site supported by Microsoft in Illinois. Now it’s planning to develop up to 2,000 MW of gas-fired electric generation capacity in Texas, pending the successful implementation of key market reforms, appropriate market signals, and other conditions.
These strategic investments in renewable and gas-fired generation, coupled with Vistra’s robust earnings, demonstrate the company’s commitment to providing reliable, affordable, and sustainable power to its clients while driving growth and shareholder value.
92 hedge funds hold long positions in the company, with a total stake value of $4.03 billion. The highest stake is held by Lone Pine Capital. Investors are becoming more interested in this company because of the way it plans to benefit from the growing popularity of GenAI since rising AI use is directly related to rising energy needs.
Legacy Ridge Capital stated the following regarding Vistra Corp. (NYSE:VST) in its Q2 2024 investor letter:
“One of the sectors we know well which had been out of favor for several years has quickly come into favor: Independent Power Producers (IPPs). We’ve written consistently about NRG and Vistra Corp. (NYSE:VST) since the 2019 letter, have owned each, or both, since 2018, and invested a meaningful amount of our assets in VST specifically the past few years. Nate and I intend on spending more time in the year-end letter on our updated views on the IPPs and our learnings from the on-going investment, but we were a bit surprised how quickly the narrative around these companies changed. Our Blue Sky 2030 estimates of intrinsic value converged with the share price 6-years before we thought probable. In the 2019 letter, with respect to VST, we wrote:
“Over the next decade management should have close to $15 Billion to deploy to share repurchases. If you assume they have to pay an average price for the stock that’s higher than the current one, and they can only repurchase 60% of shares outstanding instead of the 100% the math implies, FCF per share in 2030 would be $14. That’s a $70 stock at today’s valuation, but a $140 stock at a more reasonable FCF yield of 10%.” And… “The IPPs are un-investable for most money managers, so there we are. When they become investable we’ll probably be long gone.”
We’re not exactly long gone, but sentiment has certainly surpassed investable. After 5+ years of VST trading between $17 – $26 a share—and $26 exactly a year ago—it hit a high of $107 in May on the heels of the Artificial Intelligence (AI) narrative and the implications for electricity demand. While we agree with the prevailing consensus view that more Data Centers will be built, Data Centers require base load energy, and that the US will probably be short base load energy, predicting the rate of any technological advancement is not our area of expertise, and we feel the margin of safety has dissipated. Therefore, what had been our largest position entering 2023 and 2024, and has been our greatest contributor to performance, is now one of the smaller positions in the fund.”
