The United States is fully immersed in summer this week with scorching temperatures driving air conditioners into overdrive. A powerful heat dome has enveloped much of the country, pushing temperatures into the triple digits across 28 states, triggering everything from the activation of cooling centers to emergency protocols for the power grid. This extreme weather event serves as a vivid reminder of how environmental factors, entirely outside of our control, can ripple through the economy and investor sentiment alike.

Meanwhile, geopolitical tensions remain front and center on the global stage. At the recent NATO summit, member nations committed to increasing defense spending to 5% of GDP by 2035, which signals a significant shift toward bolstered military readiness. With both Europe and the United States reinforcing defense postures, the international security landscape appears to be entering a more assertive and dynamic phase.

In such a charged environment, maintaining a cool and clear-headed approach to investing is essential. When headlines and market narratives have the power to sway emotions, rigorous and disciplined research becomes indispensable for investors focused on long-term success. After all, while the war drums are beating around the world, thoughtful decision-making remains the best way to navigate the markets.

Our latest Long Idea helps you do just that. The business benefits from long-term industry tailwinds and operational efficiency advantages. It returns significant capital to shareholders, and, best of all, its stock trades at a steep discount.

Below, we present a large excerpt from this week’s Long Idea report, available to Pro and Institutional members. You can buy the full report a la carte here.

We’re not giving you the ticker for this pick, but we are happy to share our hard work because we want you to see how good our research is.

This stock offers favorable Risk/Reward based on the company’s:

  • long-term tailwinds in energy,
  • asset efficiency and reserve life advantages,
  • improving fundamentals,
  • high capital return backed by ample cash flows,
  • strong balance sheet, and
  • undervalued stock price.

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Long-Term Energy Demand is on the Rise, Oil is Still King

While global energy demand will surely peak at some point, the fact remains that it is expected to rise through at least 2050. At the same time, the share of oil and gas in the energy mix is expected to stay above 53% (oil at 29% and gas at 24%) through 2050.

OPEC’s latest World Oil Outlook forecasts global primary energy to increase from 301 barrels of oil equivalent a day (mboe/d) in 2023 to 374 mboe/d in 2050, an increase of 24%. The three fuel types that are expected to see the largest increase in demand from 2023 through 2050 are renewables (43 mboe/d), gas (21 mboe/d), and oil (17 mboe/d). This company, as a leading renewable and oil provider, is positioned to benefit from this long-term trend for years to come.

Figure 1: Growth in Global Energy Demand by Fuel Type: 2023 – 2050

Sources: OPEC

Potential for 9%+ Yield

Since 2021, this company has paid $7.7 billion (15% of market cap) in dividends and has increased its quarterly dividend from $0.17/share in 1Q21 to $0.42/share in 2Q25. The company’s current dividend, when annualized, provides a 4.3% yield.

The company also returns capital to shareholders through share repurchases. Since 2021, the company repurchased $9.9 billion (20% of market cap) worth of shares. During the first three months of 2025, the company repurchased $555 million worth of shares.

The company renewed its annual normal course issuer bid (NCIB) for 2025, which allows the company to repurchase 10% of its shares outstanding. Should the company repurchase shares at the TTM pace through the next year, it would repurchase $2.4 billion of shares, which is 4.7% of the company’s current market cap. When combined, the dividend and share repurchase yield could reach 9.0%.

Strong Cash Flows Support Shareholder Return

Investors should take comfort in knowing this company will be able to afford to pay its dividends and repurchase shares due to its large free cash flow (FCF) generation. From 2021 through 1Q25, the company generated $29.5 billion in FCF, which equals 46% of the company’s enterprise value.

Figure 2: Cumulative Free Cash Flow: 2021 – 1Q25

Sources: New Constructs, LLC and company filings

The company’s $29.5 billion in FCF since 2021 is more than enough to cover its $17.5 billion in combined dividend payments ($7.7 billion) and share repurchases ($9.9 billion).

Repurchases have also meaningfully reduced its shares outstanding from 1.4 billion in 2021 to 1.2 billion in 1Q25. See Figure 3.

We like companies that choose to return capital to shareholders instead of spending it on costly acquisitions or executive bonuses that rarely drive shareholder value creation.

In addition, reductions in shares outstanding tend to ensure capital appreciation for investors no matter how growth or momentum crazed the overall market it. In other words, companies that sport strong enough cash flows that enable them to consistently lower their shares outstanding offer excellent value.

Figure 3: Shares Outstanding: 2021 – 1Q25

Sources: New Constructs, LLC and company filings

…there’s much more in the full report. You can buy the report a la carte here.

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I’ll keep sending information on quality sectors, industries, or specific companies until you’re ready to start your membership, but know that we expect this pick to outperform.

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