President Trump extended the deadline for countries to reach trade agreements with the U.S., which postpones the implementation of substantial tariff increases until early August. The announcement provided a temporary boost to investor sentiment, but also keeps global trade on uncertain terms. Volatility remains elevated, as trade tensions and geopolitical risks continue to dominate headlines and weigh on market stability.

During periods of heightened volatility, disciplined fundamental research becomes even more critical.

A deep understanding of a company’s underlying cash flows and valuation offers a significant advantage over simply following momentum or sentiment-driven strategies. While riding hype and short-term trends may offer temporary gains, only rigorous, fundamentals-based analysis drives sustainable, long-term investment success.

Our latest Long Idea is a great example of the edge that our superior fundamental research provides. This company benefits from long-term industry tailwinds, has industry leading profitability, provides high capital return backed by ample cash flows, and its stock is cheap.

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:

  • position to benefit from rising global energy demand,
  • “toll taker” business model that insulates it against energy price volatility,
  • industry leading profitability,
  • high capital return backed by ample cash flows, and
  • cheap stock price.

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Fossil Fuel Consumption Steadily Rising

Despite the massive attention and capital allocated to renewables over the last few years, fossil fuel (oil, natural gas, and, even, coal) consumption reached new heights in 2024. There’s no denying that fossil fuels remain a critical supplier of the world’s growing energy consumption.

According to The Energy Institute’s 2025 Statistical Review of the of World Energy, global oil consumption and natural gas consumption increased 1% and 2% compounded annually over the last decade. More recently, global oil and natural gas consumption increased 0.7% and 2.5% YoY in 2024, respectively. See Figure 1.

Figure 1: Global Oil and Natural Gas Consumption in Exajoules: 2014 – 2024

Sources: New Constructs and The Energy Institute

The President of the Energy Institute specifically noted “the pace of renewable deployment continues to be outstripped by overall demand growth, 60% of which was met by fossil fuels”. More specifically, oil and natural gas made up 34% and 25% of the global energy consumption in 2024, respectively, which ranked as the first and third most-consumed energy types in the world.

OPEC projects oil and gas to supply the majority of energy consumption, with the share of oil and gas in the energy mix expected to remain above 53% (oil at 29% and gas at 24%) through 2050.

Potential for 8%+ Yield

Since 2020, this company has paid $17.7 billion (34% of market cap) in total distributions. The company has increased its quarterly distribution to LP unitholders from $0.69/share in 1Q20 to $0.96/share in 2Q25. The company’s current distribution, when annualized, provides a 7.5% yield.

This company also returns capital to shareholders through unit repurchases. Since 2020, the company repurchased $1.6 billion (3% of market cap) of units. During the first three months of 2025, the company repurchased $100 million of units.

The company has $420 million of units remaining under its current repurchase authorization. Should the company repurchase units at the TTM pace through the next year, it would repurchase $351 million of shares, which equals 0.7% of the company’s current market cap. When combined, the distribution and unit repurchase yield could reach 8.2%.

Strong Cash Flows Support Shareholder Return

Investors should take comfort in knowing this company can afford to pay its distributions and repurchase units due to its large free cash flow (FCF). From 2020 through 1Q25, the company generated $23.2 billion in FCF, which equals 32% of the company’s enterprise value.

The company’s $23.2 billion in FCF since 2020 is more than enough to cover its $19.3 billion in combined distribution payments ($17.7 billion) and unit repurchases ($1.6 billion).

Figure 2: Cumulative Free Cash Flow: 2020 – 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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