Our largest holding within energy the sector is Canadian Natural Resources (CNQ, Financial) which we think is one of the best-managed and well-positioned companies among global oil and gas majors. Most of CNQ’s production and oil and gas reserves are long-life, low decline assets capable of producing for 30 years. Due to recent high free cash flow generation, CNQ has reduced debt and plans to return meaningful capital to shareholders via dividends and share repurchases.
We have recently become more constructive on energy stocks due to high expected free cash flow yields, sound balance sheets and a more challenging supply environment that could last for years. While the development of cleaner energy sources is important, pressures on energy companies and their management teams have led to significant underinvestment in new sources of supply. The industry has remained more disciplined than ever before and that will have ramifications on the supply/demand situation going forward. We believe this will be a positive for energy stocks.
From the Yacktman Fund (Trades, Portfolio)'s second-quarter 2022 commentary.
