Evaluating Energy Investments Based on Returns
"Now, here is energy thesis. Yes, demand for energy will grow, will keep on growing. However, the question when it comes to investing is what price are you paying because the growth will always be unlinear and then you have to ask not about the trend you are nailing or not about the return on invested capital in those trends. That is the key you have to understand. Bircher hataway has energy burkshire hataway energy and they are investing only when the return is above 8 10%. They are not making investments when it is lower."
The speaker outlines a thesis for energy investments, emphasizing that while energy demand will continue to grow, investors must carefully consider the price they pay and ensure a sufficient return on invested capital (above 8-10%) before committing capital. This macro perspective highlights the importance of return metrics in capital allocation decisions within the energy sector.
Harbor Energy Diversifies with LLOG Acquisition
"Harbor Energy, traditionally focused on the North Sea, is diversifying its portfolio by acquiring LLOG Exploration for 3.2 billion dollars. This deal gives Harbor exposure to the Gulf of Mexico, following previous acquisitions in South America and Africa. Despite its shares being down 22% this year, this strategic move could boost its market presence as domestic fields go into decline and windfall taxes loom."
Harbor Energy is expanding its geographic focus by acquiring LLOG Exploration for 3.2 billion dollars to gain exposure in the Gulf of Mexico. This diversification move, coupled with previous acquisitions abroad, aims to counteract domestic declines and tax pressures, potentially positioning the company for a turnaround despite a 22% drop in share price this year.
Energy Stocks as a Hedge in an Inflationary World
"So in the old days, you know, the ultimate portfolio was 60% equity and 40% bonds. That portfolio died with COVID and remains dead because the policy settings have now shifted structurally towards far more inflationary conditions. Today, for the first time in my adult lifetime, one ounce of silver buys a barrel of oil. I tend to believe energy stocks are the new bonds in a world in which bonds no longer work."
Louie Goff explains that the traditional 60/40 portfolio model is obsolete due to new inflationary policies and fiscal stimuli. He highlights an unusual market signal—a silver-to-oil ratio inversion—as evidence of shifting asset dynamics. With bonds failing to offer reliable returns, he asserts that energy stocks have now taken on a bond-like, hedge role, a view that could influence portfolio allocations as the market evolves toward 2026.
Dominion Energy's SMR Partnership with Amazon Signals a New Era
"Next, we have Dominion Energy, which operates three major nuclear plants across Virginia and Connecticut, providing reliable zerocarbon base load to more than 2 million homes. They've already extended those reactor licenses into the60s, locking in decades of operating runway. But here's where it gets a little interesting. Dominion just signed a deal with Amazon to explore deploying small modular reactors in Virginia, the first hyperscaler utility nuclear partnership on record. It's the clearest signal yet that AI powered demand is pulling utilities straight into the SMR era."
Dominion Energy is presented as a stable, cash-flow positive utility that is expanding its nuclear capabilities through an SMR deal with Amazon. This collaboration positions the company to capitalize on growing AI data center power demands.