Baytex Energy Corp (BTE.TO)

Energy is the most undervalued sector in Canada. This year, global world consumption will hit a record high. Yes, we need to find alternative energy, but demand is insatiable. The bigger names like Suncor trade at much higher PEs, but investors will eventually look at smaller names like this. Hold, if you own, and you can add shares.

Massive disconnect between its fair value and where it's trading. It hasn't been great for investors this past year. At least 10 years of inventory. Drilling some of best wells after its acquisition. Likes the new CEO. Capex spending going down, frees up cashflow for buybacks. Target of $10, so more than double. Yield is 1.9%.

His largest weight in the fund. His highest conviction right now.

Does not recommend investing. Would rather CNQ, Imperial Oil, Arc Resources or Tourmaline. Better names in energy sector. 

He's been patient with this. It's his second-largest holding. A misunderstood stock with investors thinking their oil was lousy because they bought a garbage company drilling lousy holes. Now, BTE is drilling top-quality wells. Also, they had a tax issue with Ottawa that has since been solved. Ongoing noise. Is confident with the new CEO who's bought a lot of shares. Trades at 2.5x cash flow, a discounted valuation like no other. Are buying back shares. Caveat: their #2 shareholder will eventually sell. He targets $10.

A contrarian call. Did an acquisition last year which created an overhang; the equity partner sold a third of its position. They took a modest reserve writedown on some of their tier 2/3 plays. He likes them for the results of their drilling in those new wells, continue to make discoveries in conventional oil, and a new pipeline will make a massive change to the WCS price differential to WTI. The CEO keeps buying shares, including last week. A major position for him.

They had a rough quarter while peers did well. Is not in his top 10 energy names. They're struggle to reposition into higher-margin plays as they struggle with their debt. Lacks consistency and is a high-beta name.

Energy looks good in recent days. The current low is interesting and similar to one in early 2023; share are climbing currently. In the last 2 weeks, Baytex has outperformed the S&P. The energy sector looks good.

Not being rewarded for M&A activity. Management promises of re-rating on stocks is not trusted by the markets. Believes company will gain higher valuation if focuses on prudent capital allocation (share buybacks etc.) Would advise investors to ignore over reactions of market (both negatively and positively). 

Technical perspective - downward trend not a great sign. Expecting a bottom soon in stock price which would be a good place to buy. Energy prices will rise soon. 

Very cheap valuation. Recent M&A will start to pay off in 2024. Energy outlook looks favorable. Would recommend buying. 

Has grown well in the past 10 years, has great access to capital and generates a lot of free cash. He has better choices, but likes BTE.

For Baytex there is some consolidation here due to some nervousness re the price of oil. Cenovus is similar to Baytex and has dropped to the consolidation level. It could go to the $20 level in the next 3 to 6 months. Don't buy energy now since it could retrace much of its big gains.

Recovered from overhang of the Ranger deal, which made the company better. Respects CEO, great asset base, clear vision to using free cashflow to pay shareholders more and pay down debt. Second-highest free cashflow yield in NA.

No longer a pure play on heavy oil. Moves in and out of favour depending on leverage to oil. See his Top Picks for a heavy oil producer he prefers over this one. He prefers scalable, heavy oil projects that generate strong margins.

Has reduced energy exposure. Unsure on direction of sector. Believes over bought. Seasonality is weak until February. Has sold half of position.