Investment Q&A

Q: Good Morning 5i,

So on this fine Friday long weekend morning, I'd like to pick the brains of people who've "been there and done that" much longer and more successfully than I, and have seen some things in the financial world first hand that I have not.

I want your opinion on oil and gas. Are we not watching one of these classic "blood in the streets" scenarios you always read about as investors and wish you'd had the fortitude to plug your nose and dive in? The shares of almost every publicly traded company in the space are being thrown away for nothing. The good ones, the bad ones, the ones making money, the ones losing money, good balance sheets, bad balance sheets - it's almost irrelevant. If they're in the space they're being slaughtered.

So if the thesis is:

a) it will take a lot longer to power the world with worm casings, pixie dust, and unicorn farts than some would have us believe (i.e. hydrocarbons are not going anywhere in the foreseeable future)

b) a surprising number of these companies have solid balance sheets

c) a surprising number of these companies are earning profits hand over fist, doom and gloom aside

If a, b, and c are indeed true, you'd have to believe a lot of these companies trading at historic lows will eventually make investors a lot of money. Like buying Florida real estate in 2009.

What am I missing? What holes can be shot in this thesis, looking at it objectively?

I take the point that there is no catalyst to change things or excite investors in this space (although I do get surprised from time to time that the fact that a company can throw off ridiculous amounts of profit and return it to shareholders via dividends and buybacks doesn't itself become a catalyst, but I digress...)

I also take the point that these scenarios can persist for a lot longer than people think they can before things change.

Single-company risk is always there, I understand that, but I reject the idea that all of these companies are headed for bankruptcy.

Aside from patience and the stomach to watch your investment get hammered in the short term - where exactly are the risks?? This seems like such a great buying opportunity that I feel I have to be missing something.

Thank you for whatever insight you can share, and happy long weekend to you and your families!

Ryan

Q: On BNN last week one of the guests stated that insider trading in large oil companies has been rising. Would this fit in with your assessment of the sector and in your opinion does this indicate that it might be time to start taking a position in the oil and gas sector. If so then would you have a few stocks to recommend, perhaps three small to mid cap and a couple of larger ones. Thanks.

Q: Hello. Which of these do you prefer, and why? (Or do you prefer another large-cap Canadian oil company?) Can you tell me which has the strongest balance sheet, and the safest dividend? Also, I was going to buy them on a US exchange with US currency. I assume the dividend will be paid in US dollars, and I will still be eligible for the Canadian dividend tax credit, correct? Thanks for your help.

Q: I noticed that SU and ENB were mentioned by your team as safe in capital preservation and dividends. Some analysts do point out that ENB has a high debt and therefore they conclude it is not as safe. Is this correct ?. In terms of safety, and long term investment (at least 5 years) which one would you preffer ?
Would you allocate 5% to each in a conservative porfolio ?, or less than 5% ?,
thanks

Q: Could you please rate the below as to capital preservation and dividend safety. comment on you choices if possible.
ENB,SU,VET,CHR,AD,SPB,BPY.
Thanks
Yossi

Q: I looked at Morningside Quant Reports Thompson Reuters Reports and other stats on the above stocks and found the following:
TSGI. 16% Discount Undervalued. PEG .47 Moderate Buy/Buy ratings from 6 analysts

NFI. 26% Discount Undervalued 9X P/E Moderate Buy/Buy Rating 6.2% Yield , 4 analysts

COV. 47% Discount Undervalued. 0 analysts

MX. Significantly Undervalued 7.5 P/E., PEG .11 Moderate Buy/ Hold Rating, 4.34% Yield, 9 Analysts.

SU. 21% Discount, Significantly Undervalued 10.5 P/E, 7.24 PEG, Moderate Buy/Buy Rating 4.44% Yield 15 Analysts

PHO. 35% Discount, Undervalued. 15.2 P/E, Strong Buy/Buy Rating, 3 analysts.

What value do you place on Quantitative Reports as compared to other analyses? How useful are they? Are the above stocks overdone on the downside primarily due to recent global markets uncertainty or because of their own performance. The above stocks seem to have been severely re-evaluated. The idea of exiting a falling position is to eventually replace it with a position with better upside and less risk which seems to be the challenging bit. Your comments and opinions please.

Clarence

Q: Hello Team,

Is WCP safe? is the dividend safe? Do you have a better oil name pays dividend?

Thanks,
Issak

Q: Good morning
As retirees, and still with a longer-term horizon, my wife and I own (and like) Suncor (integrated), Prairie Sky (no debt) and Peyto (low cost producer) for minimal risk; second, dividend income, and third, capital growth. Oil & Gas is 4% of our diversified portfolio. We plan to keep Suncor. I am considering Freehold Royalty, Tourmaline, and Ensign Energy Services as possible replacements for PSK and PEY.
Q1: Do you feel the stock price declines in the Canadian oil and gas sector represent investor capitulation?
Q2: I would appreciate your comments on the 3 stocks being considered. Would any of TOU, FRU or ESI better meet our investment objectives, compared to our current holdings, PSK and PEY?
Thank you for your advice on this.
Edward

Q: Seems like fear has overtaken reason in Cdn oil stocks, would you take a position in the above names? All are very profitable even under present circumstances. Thanks.

Q: Please comment on SU's recent Q & u opinion of the co.The sector is terrible.Is it ok to add to my 2% position(p/p $42.59)?Txs for u usual great services & views

Q: is it advisable to invest in Vermulin energy & Encana?
Also why is suncor stock going down in value?
Thank you

Q: Your Analytics program has provided a convenient tool to see the weightings in my overall portfolio. From this I have learned that while there are some with larger percentages I have many positions between 1 - 2% weighting. Sometimes this resulted from my having initiated small purchases and sometimes from falling share values. In any event, I wonder if I am spread too thin? I guess one part of this is that the small positions will not move the dial. On the other hand, quite often your members ask what you might recommend when looking at choosing between 2 stocks and the answer suggests having both, for better diversification.
1. So my first question is whether positions of 1 - 2 % are too small or is this good diversification?
2. In this context, my next questions are about positions of 1.57% and 1.42% in Enghouse and Kinaxis; are these positions too small and if so, which would you sell and which to keep / add to? And similarly, positions of 1.39% and 1.18% in Parex and Suncor. If these positions are too small, which to sell and which to keep / add to?
3. In a similar vein, I have one or two positions that have suffered from considerable declines in share value and there is .36 and .56 of a position. What should I do if I do not want to sell, either because I still believe in the prospects or because it is too painful to sell just now. I often see your answers suggesting you do not believe in averaging down but holding such a small position seems not effective.
4. My last question is about Constellation Software. It is of course one of the better performers and partly as a result presently I have a weight of just under 3.5%. Given its success, would you recommend adding to have a larger position, and if so, how much?

Thanks for your excellent service.

Q: These firms are my top four holdings. Any concerns as we move to a bit more defensive portfolio?
Historically, is their a sector that is the "canary in the mine" that would be a sign of a bear market?

Q: I am trying to clean up my Energy sector. I have the following: CPG, CVE, ERF, HSE, IMO, SU, TRP, VET, MX Could you please place them in order, starting with first to sell.

Also, could you please let me know which companies I should buy with the proceeds. I have a very long timeline, and I feel that companies that are rather low right now may jump a fair bit when the price of oil rebounds.

If there are any other companies that you would suggest to buy, please include them as well.


Thank you once again,

Fed

Q: I have some extra cash to add to the balanced portfolio. Can you select 3 of these stocks that present the best purchase opportunities at the moment for a long-term hold?

Q: I'm down on a full position in VET and thinking of swapping it for a reduced position in SU partially for the capital loss, partially to reduce my full energy holdings but also for more stability with SU. I think SU is vertically more diversified and bigger and therefore better for a conservative retired investor like me. Does this sound like a reasonable plan or should I just hold cash and rebuy VET in 30 days and go on enjoying the higher dividend it offers?

Another reason the Su interests me is that VET's high dividend is nice but worries me. Other times I've held on to a company with a high dividend I have ended up with a capital loss that far outweighs the accumulated dividends. I would like to know if you consider VET's or SU's dividends "safer"? What might cause either of them to cut their dividend.
Two questions I guess.

Q: Results appears to be good,but dropped sharply afterwards.Is it due to sharp drop in oil price along with fall in N.Amercian markets?Any other news? It is prudent to add to my 2% position($42.59 p/p) Thanks for u usual great services & opinions

Q: Hello 5i,

I only have enough cash for one position. Which of SU or GIL would you pick up first?

Or would you wait for the dust to settle. I will be purchasing both eventually once I dispose of other holdings.

In order of preference please.

Thanks,

KC

Q: I have not ventured back in to the gas/oil sector yet but thinking of doing so. Do you prefer services or producers at this point? For producers, do you prefer gas or oil or a mix? Could you give me a couple of your favourite names that you suggest I consider for getting back into the sector? I have a long time frame, medium tolerance for risk and like growth. Thank you for all your help.

Q: Which TSX-based mid-sized (and larger) oil and gas explorer/producers, with strong balance sheets, would 5i most favour for a recovery in the Canadian resource sector?
Thank you.