Baytex Energy Corp (BTE.TO)

Baytex versus HMMJ. There is no correlation between these two. BTE-T looks fine technically as he thinks WTI should return back above $70 before year end. The recent breakout is positive, especially since it was basing around $3.50. He does not understand the cannabis market, so can’t render an opinion. “You can’t make an iPhone in your basement, but you can grow marijuana.” He thinks demand is already met, so he would only hold a small lot of HMMJ-T to talk about at cocktail parties.

(A Top Pick June 1/17, Up 7%) BAYTEX BOND 6.625% A bond that offers a return like a stock. In 2014, Baytext stock got hammered and the bonds got hurt too when oil plunged. That was an opportunity and he's done well by this. Compared to the Baytex stock which is tied to oil's ups and downs, the bond is a quiet ride that enjoys an 8% return.

One of the heavy oil producers. They made an acqusition of Aurora at the wrong time, so they got stuck with bad oil prices and wound up with a rocky balance sheet. The oil differentials have recently narrowed in their favour, but analysts expect them to expand back over the summer. The balance sheet has improved.

This is one of the go to names for beta to oil. It only trades 4.1 times EBITDA and has over 130% of upside if WTI goes to $80. Their Eagleford results have been good, but not enough to move the needle. If you are bullish on oil, this is definitely a name to go with.

Very lever to a higher oil price. The balance sheet is pretty indebted. Strong reserves growth. A risky name. There are much easier and safer ways to make money.

He thinks the stock is going up but that others will go up more. Others will yield meaningfully more leverage to the change in oil price, and he believes oil is going up. Also, Baytex has some debt. Its leverage position is not precarious but it is significant. Too much of its cash flow goes back to the bank rather than to buybacks or to accelerating growth.

(A Top Pick Mar 2017 Up 7%) Baytex 6.625% 2022 bond. They are a heavy oil producer struggling with wider differentials, but they also have interests in the Eagleford region of Texas. If oil prices recover, the bond will give a 12-15% rate of return and they can sell their Eagleford holdings to protect the bond value.

Baytex has been stuck in a flat pattern for a long time. Until it breaks out, he would not buy it. He owns a few energy stocks, but selectivity is important. He looks for a breakout before buying: that indicates money is flowing into the stock.

Intermediate to reasonable large oil stock. The outlook for the energy sector is negative. He would wait until earnings flow. Very negative psychological attitude about the energy area. He thinks they are too soon. Not like tomorrow we are going to be driving electrical cars. But he would wait.

A very popular stock for people who look at stock charts. Unfortunately it incurred a lot of debt before the downturn in oil. As a result, they lack the same amount of operational flexibility as other names. They can't benefit nearly as much in the inflection of the oil price, because too much of their cash flow goes back to the bank in the form of interest. There is an element of risk, versus buying a name with a bit cleaner balance sheet where they can benefit from a higher oil price. Not a name he would own right now.

A more leveraged company and this is his problem. Almost 1 to 1 ratio of asset to debt. They won’t see volumes grow into 2018/19 so they need to a increase in oil prices. The balance sheet is why you stay away from it.

Despite the fact that we see WTI up to $57 and Brent over $60, the Canadian producers are not reflecting those price levels. In fact, the differential has widened. A lot of Canadian energy producers are down, and she doesn't have a lot of exposure. Feels this one is more highly levered than some of the others. She would rather own a very low-cost producer with a very strong balance sheet.

(A Top Pick March 28/17. Up 8%.) 6.625% Bonds maturing in 2022. The biggest challenge is that they have to lower their debt balance.

Oil stocks have a very strong seasonality from about mid- January until approximately May of each year. This has not reached its period of seasonal strength yet. It’s drifting lower. You want to see the stock form a base pattern between now and January, which will be the tip that the stock will break out of its downward trend and start to move on the upside.

Energy is tough. When it rolled over in 2014, there was a 66% decline. At $26 a barrel, oil reversed and there was a one-year rally, quite similar to what happens when a bubble bursts. The difficulty is that the industry has changed. When the price goes up, production can come on pretty quickly with fracing. Look at these as trades, not some structural long-term bull market. If you are going to invest in oil, you want to buy one that has been able to get better while everybody else has been struggling. The 150-day moving average on this one is falling. He would pick a point below the price it is trading at now, such as $3.50, and use that as a Stop/Loss.