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Tourmaline Oil Corp. (TOU)
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Whitecap Resources Inc. (WCP)
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Tamarack Valley Energy Ltd. (TVE)
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TerraVest Industries Inc. (TVK)
Q: Hi,
These are my energy holdings with TOU 2.7%, TVE 0.61% and WCP 0.48%. They've pretty much been flat for the last three years. Other than the dividends and special div's that TOU pay, what is the thesis for holding or adding to energy currently? I know valuations are low, but what will be the catalyst to get them moving again other than higher energy prices? I have TVK as well at a 3.9% holding and have included that in my energy allocation as well and its been a big winner. Looking at opportunity costs here from holding these energy names vs other names.
Thanks!
These are my energy holdings with TOU 2.7%, TVE 0.61% and WCP 0.48%. They've pretty much been flat for the last three years. Other than the dividends and special div's that TOU pay, what is the thesis for holding or adding to energy currently? I know valuations are low, but what will be the catalyst to get them moving again other than higher energy prices? I have TVK as well at a 3.9% holding and have included that in my energy allocation as well and its been a big winner. Looking at opportunity costs here from holding these energy names vs other names.
Thanks!
5i Research Answer:
Energy of course is cyclical and when it moves returns can be big. TOU has a 22% return over one year even without including special dividends or regular dividends. We would be very happy with that. WCP is up 18%. TVE up 47%. Nat gas has bounced off its lows and oil is hanging in there even with lots of uncertainty. But the thesis for holding is valuation and balance sheets. The sector is in significantly better financial shape than in almost any prior cycle. Combine this with low valuations, and the bounce could be very big under better conditions. But investors do not need to own a sector if they do not want to. We view a 0% sector weighting as a bet against a sector, and we think things do look better than that.