Market Overview:
Markets at all time highs due to rate cuts and stimulus
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ECOPETROL ADR EC
Ecopetrol S.A. operates as an integrated energy company. The company operates through four segments: Exploration and Production; Transport and Logistics; Refining, Petrochemical and Biofuels; and Electric Power Transmission and Toll Roads Concessions. It engages in the exploration and production of oil and gas; transportation of crude oil, motor fuels, fuel oil, and other refined products, including diesel, jet, and biofuels; processing and refining crude oil; distribution of natural gas and LPG; sale of refined and petrochemical products; supplying of electric power transmission services; design, development, construction, operation, and maintenance of road and energy infrastructure projects; and supplying of information technology and telecommunications services.
As of December 31, 2022, the company had approximately 9,127 kilometers of crude oil and multi-purpose pipelines. It also produces and commercializes polypropylene resins and compounds, and masterbatches; and offers industrial service sales to customers and specialized management services. It has operations in Colombia, the United States, Asia, Central America and the Caribbean, Europe, and South America. The company was formerly known as Empresa Colombiana de Petróleos and changed its name to Ecopetrol S.A. in June 2003. Ecopetrol S.A. was incorporated in 1948 and is headquartered in Bogotá, Colombia.
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The valuation is incredibly attractive. 2.5X Cashflow, single digit Price to Earnings, and a significant 32% dividend policy.
In the past, When the valuation trades below $20B, the shares have rebounded by nearly 150% to 300%
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Drawbacks include a high debt load and low return on equity.
Use a 10% Stop
CPA COPA Holdings
Copa Holdings, S.A., through its subsidiaries, provides airline passenger and cargo transport services. As of December 31, 2024, it operated through a fleet of 112 aircraft. The company was founded in 1947 and is based in Panama City, Panama.
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The valuation is excellent. 3.5X cash flow, 27% Return on Equity, Single digit price to earnings ratio, and a 5.4% dividend.
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Commitment to Dividends and improving margins
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Strong Balance Sheet and Shareholder Returns
- Liquidity: As of Q2 2024, Copa held over $1.2 billion in cash and investments, representing 35% of the last 12 months’ revenues, providing a strong liquidity position.
- Debt Management: The company’s adjusted net debt to EBITDA ratio stood at 0.6 times, indicating prudent debt management.
Annaly Capital Management NLY
Annaly Capital Management, Inc., a diversified capital manager, engages in mortgage finance. The company invests in agency mortgage-backed securities collateralized by residential mortgages; non-agency residential whole loans and securitized products within the residential and commercial markets; mortgage servicing rights; agency commercial mortgage-backed securities; residential mortgage loans; and agency or private label credit risk transfer securities. It has elected to be taxed as a real estate investment trust (REIT). As a REIT, it is not subject to federal income tax to the extent that it distributes its taxable income to its shareholders
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Overview: Annaly is a contrarian play on the normalization of the real estate market as well as the end of the interest rate hiking cycle.
Yield: 12.6%
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Valuation:
Price to cash flow is at the lowest point in eight years.
Shares are trading at 3X cashflow. Strong return on equity of 18%
Use a 10% sell stop
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