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I am buying HY for the free
cash flow. Follow Warren Buffett's investment strategy. Buy companies for the free cash flow provided the valuation is reasonable. HY is expected to make Rm3-4 in 2026 alone. Now it is 2.60 only. Below its FCF in 1 year. HY should be trading at 4x FCF = 25% ROI. Even if the war ends tmr, the world still need to replenish the draw down of reserves which is almost 1 b barrels.
When a company is trading below its FCF, buy.
In Q2 the average crack spread for HY was Us$23. Q3 should be around Usd 40. But what we don't know is how the high transport cost affect the crack spread. But making Rm600m shud not be a problem.
US news report that US and Israel are considering to attack Iran after US mid term elections. Brent is now 112. If that happens, oil will go ballistic this time as the oil reserves are depleted. So we are looking at $150 or more. And staring at global recession. Only energy stocks will go up in that case. Massive inflation. 2 more weeks to election in US.
Goldman forecasts global diesel and jet-fuel crack spreads — the premium refined products command over crude — will average above $40 per barrel in 2027, more than twice their usual level of around $20.
