Ian Clark presented his in-depth investment thesis on Dynegy (NYSE: DYN) at Best Ideas 2017.

Dynegy: In the current environment finding a company with sustainable cash flows at a low valuation is difficult. Dynegy offers that thanks to undue pessimism surrounding the electricity markets in North America. The headwinds for Dynegy include newbuilds, a large unhedged exposure, a leveraged balance sheet, and legacy coal assets. These headwinds are outweighed by robust cash flow generation over the next few years and a gradual rationalization of supply and demand. Dynegy will produce more than $6 per share in FCF over the next three years, an attractive opportunity relative to the current price of $8.46. Through subsidiary restructurings and debt amortization, Dynegy will see debt drop to under 5x EBITDA in the next 12 months. With a simplified balance sheet and prodigious cash generation, Dynegy is a rare combination in today’s market.

About the instructor:

Ian Clark is the Managing Director of Dichotomy Capital. He began his career in chemistry designing organometallic catalysts and novel synthetic routes. He received his M.S. in Chemistry from the University of Oregon. While working on his Masters he completed research at Cornell University that resulted in two patent applications. The dislocation of 2009 led him to research a better way to invest. Applying the same approach utilized in his science background, Mr. Clark began publishing his investing ideas to receive feedback and criticism.

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