Magnolia Oil & Gas (NYSE: MGY) is a small oil producer and a great long-term investment for retail investors and small funds, who want to not only take advantage of oil price increases in the near future but also look for a long-term addition to their energy portfolios. The company has strong and predictable cash flows even at low oil prices. We initiated a new position in $MGY in 2020 for our fund and by the end of Q1-2021, the company represents more than 5% of the fund’s portfolio.

Our investment thesis estimated the fair value of $MGY to be $12.05 at WTI oil prices in the low $40s. The current oil prices have been above $60 recently and is expected to either stabilize at this level or, if the recovery accelerates, to rise much higher in 2021 and 2022. Thus, the current market price $11.26 (as of 4-30-2021) represents a significant discount.

We are expecting very positive results from Q1-2021 earnings.