Buying VST at a Discount? You Are Getting Paid to Do It

At about $165.64 a share, Vistra (VST) is trading about 24% below its 52W high.

Do you think VST stock is a good long-term bet at current levels? What about at a 50% discount at about $85 per share? If you think that is a steal, and have some cash ready to go, here is a trade.

8.4% annualized yield at 50% margin of safety, by selling Put Options.

• Sell a long-dated Put option expiring 1/15/2027, with a strike price of $85
• Collect roughly $357 in premium per contract (each contract represents 100 shares)
• That’s about 4.4% annualized yield on the $8,500 you’re setting aside for the possibility of buying the stock
• This cash parked in a savings or money market account will earn an extra 4.0%, taking total yield to 8.4%
• And you give yourself a chance to buy VST stock at deep discounted price of $85

However, this is not the only stock strategy in town. Trefis High Quality Portfolio is a sophisticated framework designed to reduce stock-specific risk while giving upside exposure.

Possible Trade Outcomes: You Win Either Way

But to hold this trade with conviction, you want to see long term upside in the stock. Because if it comes to it, you want to be excited about buying the stock cheap.

First, you want fundamentals to check out. For details, see Buy or Sell VST Stock or check Vistra Investment Highlights

Second, you want to better understand competitive advantage and industry tailwinds. Below is what specifically gives us the conviction.

Why Hold VST Stock Long-Term

Vistra is a scaled and diversified power producer in a market with strong, secular tailwinds from electrification, AI-driven data center growth, and the transition to renewable energy. This provides a long-term growth runway. The company’s integrated model and focus on reliable, low-cost power generation create a durable competitive advantage. Even with the risks associated with its carbon footprint and operational complexities, the essential nature of its service and the industry’s growth trajectory make it an attractive long-term holding.

Competitive Advantage

We classify VST’s economic moat as WIDE, with the primary source being Cost Advantage

• Vistra is the largest competitive power generator in the U.S. with a diverse portfolio of natural gas, nuclear, coal, solar, and battery storage facilities, giving it a scale and cost advantage.
• The company’s integrated retail and power generation model allows it to efficiently source electricity to serve its approximately 5 million customers at the lowest cost.
• Vistra has been actively acquiring assets (Dynegy, Energy Harbor, Cogentrix) to increase its generation capacity and market share.
• Vistra’s retail brands, TXU Energy and Dynegy, have received top rankings for overall satisfaction and price competitiveness in the industry.

See Vistra Full Analysis.

Industry Tailwind

The industry tailwind is STRONG, with CAGR projection of 2.74% (Mordor Intelligence)

Secular Trend: Electrification & Digitalization
Key Risks: Regulatory pressure on carbon emissions and operational risks associated with nuclear and battery storage facilities.

Financial Guardrails

Cash Generation: Positive Free Cash Flow
Balance Sheet: Vistra carries a significant amount of debt, with a high net debt to equity ratio. However, the company generates substantial cash flow.

Not comfortable with options or stock-specific trades? PORTFOLIOS are even better.

Multi Asset Portfolios Offer More Upside With Less Risk

Individual stocks can soar or tank but multi asset exposure steadies the ride. A spread out portfolio captures upside while limiting the damage from any one market.

The asset allocation framework of Trefis’ Boston-based, wealth management partner yielded positive returns during the 2008-09 period when the S&P lost more than 40%. Our partner’ strategy now includes Trefis High Quality Portfolio, which has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices