Trade Updates
Adding To Existing Positions & Starting A Position In Vertex Energy
I have been a pretty active buyer lately, and I wanted to provide a portfolio update with the new trades. Unfortunately I had to watch Vornado VNO 0.00%↑ rip higher without me on expectations of lower interest rates in 2024, but I have been busy deploying some of those gains into other positions. I have added to my Borr Drilling BORR 0.00%↑ and Peabody Energy BTU 0.00%↑ positions, and to a lesser extent, Enovix ENVX 0.00%↑ and the Valaris VAL 0.00%↑ warrants. I have also added a new stock to the portfolio, Vertex Energy VTNR 0.00%↑, with a small starter position with the intent to keep buying in coming weeks. I have a couple juicy dividends coming from Petrobras PBR 0.00%↑ and Ecopetrol EC 0.00%↑ in the next couple weeks, and I’m hoping for some more buying opportunities in a couple of these stocks.
Borr Drilling
I won’t do a full breakdown on Borr Drilling, but there have been several new developments worth mentioning. I have been buying more shares, and I think we could see the train leave the station over the next couple years. From what I have seen, it looks like the day rates for jackups could potentially increase faster than the day rates for deepwater rigs. If that proves to be the case, Borr is set up beautifully for the next couple years as their existing contracts roll off.
Borr Drilling: Premium Jackups With Catalysts On The Way
Summary Borr Drilling owns a fleet of 22 premium jackups with two new builds on the way. Their jackups command a premium day rate compared to older jackups. Like deepwater rigs, there is very little supply of jackups coming online, and many are set to be scrapped in coming years. The same bullish case for deepwater rigs can be made for jackups, with a lack of supply leading to a supply and demand mismatch, ultimately leading to higher day rates.
The catalysts I predicted, which included debt refinancing and capital returns, have come to pass, and sooner than I thought. They refinanced the debt (which I talked about here) and more recently announced a $100M buyback program, along with a quarterly dividend of $0.05 (assuming it is approved at the upcoming special shareholder meeting). I thought it could take longer to see capital returns, but management looks like they are going to step on the gas as fast as possible. The market cap is at $1.76B, so $100M is a meaningful buyback program, and now investors also get paid to wait. If management keeps the payout the same for the next year, that puts us at a 2.8% forward dividend yield. Not huge compared to some of the other stuff I own, but I think the dividend growth could be impressive if we look forward a couple years.