Partner & Senior Portfolio Manager at Ninepoint Partners
Member since: Mar '10 · 2424 Opinions
Oil prices slid last fall into early winter last year because demand was weak, US shale production was surging, and the Saudis reacted by surging their own production which lead to price crash. Today, oil demand is at record highs, US shale production is starting to fall given consolidation, and the Saudi/OPEC production cuts working which has reduced price volatility. Now, oil fundamentals are strong and support $80 WTI. There's moderate political risk, but summer demand is coming. A price spike is possible ahead. He's bullish Canadian oil stocks which don't need the oil price to rise, at least for some stocks.
Never sell because a stock hits a 52-week, but only based on risk/reward. ERF is being bought by a North Dakota producer, Chord Energy Management have done a great job. They struggled after selling their Canadian assets and held onto their North Dakota Marcellus assets.
ERF is being bought by a North Dakota producer, Chord Energy Management. He's bullish oil. Using an $80 per barrel baseline, CHRD next year (after they absorb Enerplus) should trade at 3.4x cash flow and 14% free cash flow yield (vs. most names at 7-8%). At a 5x multiple next year, CHRD would trade at $253 price target or 42% upside.
Canada's go-to natural gas name. Great CEO, much insider share ownership, decades of high-quality inventory, and quality infrastructure. Everyone wants to own nat gas now, because next year will see a big buildout of LNG capacity which will raise nat gas prices. Now, there's a lot of nat gas in storage because last winter was so mild. The next few quarters will be nasty for the nat gas price, but the market knows this. At $4 nat gas in 2025, TOU would trade at 5x cash flow and 10% free cash flow yield, a premium to its peers. $89 price target or 42% upside.
He thinks their CEO is resigning and they cut their dividend, though trades at 2x cash flow 2025. Balance sheet is fine. But there's a lot of noise here, and investors are looking elsewhere.
A 5% weighting for him, a sneaky way to get exposure to gas and condensate, the largest in Canada. Disciplined managers. Trades at a discount to TOU-T. Trades at a 10% free cash flow yield. $38.50 price target or 57% upside.
His biggest holding though has reduced it. Trades at 13% free cash flow yield, so as shares have risen, that yield has declined. The new CEO looks capable and he remains bullish MEG. He expects a change in Ottawa next year which will be reduce political risk. Meg should hit its debt target in Q3 which could trigger share buybacks. He targets $42 or 31% upside.
Nothing to do with balance sheet or management, but it remains too small to be relevant to larger investors. Scale isn't there.
A large disappointment due to their acquisitions, which haven't paid off yet. There are no more overhangs, though, so this could rerate higher. He target $6.80 or 73% upside. Are a prime target to merge to gain scale and attract large investors.
Trades at 11% free cash flow yield. Disciplined, he sold and took profits, though realizes this could be a mistake. They have two large projects that could increase production later. Management have done a great job.
Disappointing. They've struggled with downstream operations, frustrating investors, and are working to fix this. He expects them to reach their debt target in August, then they will pivot to 100% free cash flow. $43 target price of 57% upside. Trimmed his holding slightly. Trades at a discount to CNQ.
How to tell a value trap from a value stock: A trap has no catalyst to re-rate it. In a value stock, management has a successful track record, valuation, the company has a strong balance sheet, and asset quality where the company doesn't need to keep companies to add inventory.
It's mispriced and should be higher. Are active acquirers which creates overhangs. The street perceives them as liking to do deals, so sentiment is poor, which is baffling. Until this perception changes, WCP will lag. But he likes their free cash flow yield and other metrics.
The biggest knock is that they have 5 operations round the world when they need focus. It remains challenged and deserves to trade at a discount. Look elsewhere for less risk and more reward.
Has done phenomenally since Covid. Management has done a great job buying assets. Holding it back now is a lot of natural gas in storage because less was used during this mild winter and Paramount owns a controlling block; so if Paramount does a deal, will they sell NVA? Metrics are good, though and are buying back stock. He targets $24 or 96% upside, but there's that overhang. No easy fix for managers.