STR - For A Number Of Reasons I Would Not Buy Sitio Royalties Corp.
2024-07-17 13:12:05 ET
Summary
- Sitio's $200 million stock repurchase plan is irrational because it increases their financial leverage in a risky commodity business.
- Their negative total return since their 2017 IPO reflects their weak business model.
- A Trump win in November could result in lower energy prices, which is good for consumers, but bad for royalty investors.
- Sitio Royalties is effectively controlled by Kimmeridge.
Sitio Royalties Corp. ( STR ) is in the merger and acquisition business. While many investors may assert that Sitio is in the oil and gas royalties business, their actual success is based on prices paid for acquisitions and their ability to negotiate favorable merger terms. So far, they have been rather unsuccessful because their total return has been negative since their 2017 IPO as a SPAC. Since I am not impressed with their current management, and I am not bullish on energy prices, I rate STR stock a long-term "sell" relative to other investment opportunities....
For A Number Of Reasons, I Would Not Buy Sitio Royalties Corp.