Birchcliff Energy Ltd. (BIR.TO)

(A Top Pick June 12, 2017. Down 33.70%). This has been a nasty market. The TSX energy index is down 10% year to date and the big international investors are hiding in the CNQ’s and the Suncors. The natural gas stocks have been devastated. Birchcliff is very cheap. It’s book value at the end of 2017 was $6.30. It trades today at $3.87. They are 79% natural gas, 21% liquids. In 2014, this stock traded at 2.2x book value, so it should trade at $13 to $14 in a bull market. His target for a year from now is $9. It also pays a 10 cent dividend, for about a 3% yield. The negativity around this stock is about takeaway capacity, which has been very tight, but capacity has been rising significantly, especially for liquids. As companies shift focus, their total production doesn’t increase but their proportion of liquids increases as the payoff and prospects for these has improved.

Hey says production came in higher than his expectations in Q4. It is trading just above 2 times cash flow and it has a good dividend. Book value is estimated at $6.30 and it has traded close to 3 times book value historically. He and his family own this one and he sees a price of $15 over the next 3-5 years. Yield 3.1%. (Analysts’ price target is $5.79 )

He can't forecast this over five years. Hold onto it if you are long-term and happy with the dividend. The share price doesn't reflects its value, but he doesn't see a catalyst to spur an increase. Overall, natural gas is struggling.

He is seeing good things about the LNG project with Shell. There is a feeling that it could be a project they move forward with this summer. Drier gas is the lowest on the pedestal that investors are looking for.

70 -80% Natural Gas. They have a good hedge book and balance sheet. Trades at half book when traditionally these companies are 1.5 - 2 times book. (Analysts’ target: $6.35).

A must hold. A below-$5 energy stock in a sluggish energy space. Don't hold it below $3. It's been sliding, but it's stopped at historical low of $3.30 from early-2016. Will it stay here?

Poster child for investors not wanting to own gas stocks anymore. A name that is intriguing. Trading 5.5 cash flow. Should be fully discounted. But there are concerns about take away, summer gas. Unless there is a demand increase LNG you need supply to fall off. He would rather be in the oily names. Valuation looks cheap. In the next year or two years it is hard to come with a catalyst for any natural gas name in Canada.

Condensate prices have been strong and will probably continue so. They have been a wonderful grower over the last few years but gas has done what gas has done. They have great potential. She is watching it.

From a longer-term point of view, the outlook is pretty good. However, you could see some fairly choppy waters between now and then. We’ve seen that in recent volatility. This company is well-managed and has some good properties. There are others in the gas sector he prefers. If you go in now, go in with the long-term objective in mind, but be prepared as there could be more downside from here.

Unfortunately, politics is coming into play. The federal and a lot of provincial governments seem to be opposed to pipelines, so we are not building any, and we have a condition in Western Canada where we have a ton of gas being discovered, and no way to get the gas out of the country. At some point the Canadian Western gas price will rise and there will be an opportunity, but it looks like we could be in for 1-2 years of very grim Canadian gas prices. This is one of the low-cost operators and is looking at this from a long-term perspective. Wait until the quarter comes out and see how things are looking then.

(A Top Pick Jun 12/17, Down 39%) He added it December but it has not done anything yet. It could turn around quite quickly.

Had a negative transit this week of EBV -2, a Sell signal. It’s supposed to earn $.46 this year according to the analysts. The beta on small stocks are going to be substantial compared to large companies. Thinks it’s too early for this stock yet.

(A Top Pick Jan 31/17. Down 50%.) This does decent liquids and oil exposure, but they weren’t quite quick enough to hedge off their ECO exposure like some of their peers. The valuation is compelling, but he doesn’t see a fix other than this weather continuing for another 9 months.

They are 79% natural gas. It is very, very cheap. The bottom is coming in the natural gas drillers. We are close to the bottom on Natural Gas stocks. (Analysts’ target: $8.25).

Average down? As a general rule, he doesn't ever like averaging down. Mathematically, it has been proven it’s not a good strategy. You have a situation where investors are not liking the company. There are always other investors that are going to throw in the towel after you’ve averaged down. This is interesting, because the company was up for sale in the $8-$9 range many years ago, and is actually quite a well-run gas company that continues to hit new lows, and we are in the middle of tax loss right now, and he thinks there is an opportunity. Wouldn't be really too worried if you bought more, as long as your position limit is within reason. A great company, but in the wrong sector. If you have a few years, it is probably safe to Buy.