Been awhile since I posted a stock I like. Last two were X and TDY I think. Anyway I'm back to offer up PBR this time. American stocks been putting on the pounds lately so I been looking for love international and I think I found my beauty in Brazil.
51% state owned oil company. Going for a svelte 15 and a half bucks today. Market cap 100 billion. Did 4.80 per share FCF in 2023. That's nuts. Break even oil price of 20 per barrel and even the Saudis are nodding their heads impressed. What's oil now? 87 to 91 a barrel or sonething?
Pays a decent 10% dividend. Used to be more. But I hear going forward the Brazil government wants it to save or reinvest more. Maybe. Probably. Who knows? 51% of dividends are going straight into the Brazil government coffers so maybe there's temptation there.
This may be strange to say but it reminds me a bit if META in 2023. Cash generating machine knocked down in share price because people think a madman's running it. In META's case it was Zuck chasing the metaverse. Now onto PBR's risks:
The Brazil government has jacked it up before. 2011 to 2017. But it wasn't the current president Lula who did it. Some lady whose name is Rouffett or Rousseau or something. Lula was president 2003 to 2010 and PBR ran like a dream when he was there.
Now like Zuck chasing the metaverse Lula will be chasing green energy a tad. But will he kill the golden goose that funds his government? Can PBR's monster FCF withstand a few billion extracting hydrogen like META's could withstand Zuck's side project? You know what I suspect. I'm writing this right?
Only 30% of PBR oil gets sold internationally. The rest is price controlled for domestic use. But that 30% is making a pretty penny today. And the domestic set prices are plenty to create profits on the other 70%. Brazil can help consumers and feed it's pet oil company both. 20 breakeven will let you do that.
As far as the future of oil goes I heed Vicky from OXY. We're not finding more faster than we're using it. Even if we stop burning it some day in the future the stuff is still gold for petrochemical uses.
In sum the positives are FCF PE and dividends. The negatives are commie risk – Lula – and oil market risk. I like the reward risk balance. Consider it. Consider if I found you a global beauty of a value stock.
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