‘Need to see cash’: Why these fundies tip big things for the Santos share price

The oil and gas trade continues to wind up.

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Key points

  • Santos shares have consolidated gains in recent weeks as the price of oil levels backward 
  • Despite that, these fund managers are constructive on the share's long-term outlook 
  • The Santos share price has spiked 14% this year to date 

The Santos Ltd (ASX: STO) share price closed down 1.77% at market close on Friday on no news. It now rests at $7.22.

In broad market news, the S&P/ASX 200 Energy Index (ASX: XEJ) finished 1.45% down on Friday, extending its losses to 6% for the past week.

TradingView Chart

Fundies still say Santos is a buy

The oil and gas trade continues to wind up and those managing investor capital are bullish on Santos.

“It’s a buy from us,” said Luke Smith from Ausbil Investment Management when speaking to Livewire.

“We’re bullish on both oil and gas. Santos, for us, is the preferred way to play that in the Australian space. [It] has lagged the commodity for some time,” he added.

He reckons the market should start to appreciate Santos’ free cash flow growth and reflect that in share price gains.

“I [also] think ultimately the capital management will force the market to take heed to how much cash is being generated by this business,” he remarked.

Meanwhile, Tom Richardson from Paradice Investment Management is bullish on Santos as well.

Richardson said he was surprised at “how little this stock had done” with being an oil and gas play, also speaking to Livewire.

“[I]t’s just they need to see the cash,” he added. “I think that’s inevitable with Santos. As much as development optionality they’ve got, there’s going to be a lot of cash coming back to shareholders and the share price will reflect it.”

The Santos share price has spiked 14% this year to date despite reversing down 12% in the past month of trade. Over the past year, it is flat.

Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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