5 High Growth Utility Stocks to Buy

3. Vistra Corp. (NYSE:VST)

Number of Hedge Fund Holders: 46

Quarterly Revenue Growth YoY as of September 29, 2022: 72.00%

Vistra Corp. (NYSE:VST) is a Texas-based integrated retail electricity and power generation company. The company operates through six segments – Retail, Texas, East, West, Sunset, and Asset Closure. It is one of the top high growth utility stocks to consider. The Q3 2022 revenue of $5.15 billion climbed 72.2% on a year-over-year basis, while the net income came in at $678 million. 

According to Insider Monkey’s data, 46 hedge funds were bullish on Vistra Corp. (NYSE:VST) at the end of September 2022, compared to 42 funds in the prior quarter. Howard Marks’ Oaktree Capital Management is the leading stakeholder of the company, with 25.4 million shares worth $533.4 million. 

Legacy Ridge Capital made the following comment about Vistra Corp. (NYSE:VST) in its Q4 2022 investor letter:

“I sent the 2019 letter on February 10, 2020. Vistra Corp. (NYSE:VST) closed that day at $22.27. As I write in early January the price is $22.30. Now I did say “We would actually prefer it if both (VST & NRG) securities went nowhere for as long possible”—assuming repurchased shares at depressed valuations was our best-case scenario. But A) I didn’t think I’d be that right with respect to “nowhere”, and B) I certainly didn’t think I’d be right 3-years on. Here we are though, with the stock literally going nowhere for the last 3-years. Just like we drew it up!

“Management has indeed repurchased 20.3% of the shares outstanding since year-end 2019 and will probably repurchase another 12-15% of the outstanding shares in 2023. My initial assumption was that management could plausibly repurchase 60% of their shares by 2030, leaving them with 200mn outstanding (that assumed shares were appreciating and they had to pay more as the years went on, not what’s transpired so far), but at the current pace of about 50mn shares repurchased per year, they’ll hit that mark by the end of 2026, which would imply free cash flow of $10 pershare if the underlying business continues to perform as it currently is. That’s a 45% FCF yield on today’s price. Meanwhile, dividends per share have grown 54% since 2019 and the stock now yields 3.5%, growing about 15% a year.

Being paid to wait makes waiting much easier. We had sold VST shares in mid-2020, replacing some of the position with call options, to free up capital for other opportunities that became available. But when winter storm Uri hit Texas in February 2021 and VST shares went down 20%+, below $17 a share, we rebuilt our common equity position. Today VST oscillates between the biggest and second biggest position in the fund, depending on weekly performance.”

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