Vistra Corp

Vistra's 1Q EBITDA beat consensus expectations, and management reiterated its 2026/2027 EBITDA guidance. They continue to highlight expected incremental demand from data centers, industrial activity, and ongoing electrification. This positions Vistra well for future growth, with management raising fiscal year 2026 EPS guidance by 2.4% to $8.45 at the midpoint, setting a new base for its 6–8% long-term EPS CAGR.

During the first quarter, we found several opportunities to lean back into existing holdings, including Vistra Corp. (VST). We believe Vistra is well-positioned within the utilities sector, benefiting from the ongoing energy transition and demand for reliable power sources. The company has demonstrated strong operational performance and is expected to continue delivering value to shareholders as it navigates the evolving energy landscape.

New position Vistra also stands to benefit as a power supplier to data centers run by hyperscalers. The company is the largest competitive power generator in the U.S. with a 41 GW fleet of power plants diversified by geography and fuel sources. Long-term fundamentals of the deregulated power markets remain constructive with Vistra well positioned to benefit from continued tightening in its primary PJM (Pennsylvania, New Jersey, Maryland Interconnection) and ERCOT (Texas) markets. Pending regulatory clarity could also pave the way for additional power purchase agreements with hyperscalers and act as a positive catalyst for independent power producer stocks.

Vistra is an integrated electricity and power generation company. As a result of increasing forecasts for future power demand growth, largely brought on by the rapid growth of artificial intelligence, the company’s shares have continued to climb on investors’ expectations for future power prices. A tailwind for the stock has been Vistra’s potential near-term uncertainty in the federal segment, which, along with customers turning slightly more pessimistic, resulted in muted guidance. However, the need for security software remains intact, and the company should continue to benefit from cross-selling new products.

Vistra has demonstrated strong performance as an independent power producer, significantly outperforming regulated utilities due to renewed confidence in demand expectations. The company recently acquired a 2.6 GW gas portfolio, which positions it well for future growth. This strategic move aligns with the broader trend of increasing electricity consumption driven by data center and AI proliferation, suggesting a robust outlook for Vistra's operations and profitability.

Vistra made gains following a string of better-than-anticipated results by leading AI developers and IT stocks, easing investors’ concerns about a potential slowdown in AI demand and data center buildouts and pointing to continued increases in power demand as they come online. Ultimately the AI ecosystem remains short power and Vistra is among the best positioned to deliver it at a meaningful premium to prevailing prices.

We sold our position in Vistra Corp., which has been a top contributor over the past few years. While Vistra is a retail electricity and power generation company in the Utilities sector, it ended up being a play on the AI boom, given the expected demand for power as the use of AI ramps up. The company continues to generate strong cash flow and earnings, but the stock has become too expensive for inclusion in the Fund.

The letter discusses Vistra Corp. in the context of independent power producers facing uncertainty. It mentions lingering uncertainty around co-location and DeepSeek developments, but does not provide a specific investment thesis or directional argument regarding Vistra Corp.'s future performance.