Canadian Natural Rsrcs (CNQ.TO)

This is their year. Has rebounded with oil prices, still room to go. Executing well, wall of cash flow coming, good yield.

He has been involved from early stages. The key is the operation people that have done extraordinarily well as well as the timing of acquisitions. It does acquisitions on a contrarian basis. They built the business very effectively over the years and rates right there with SU-T in any portfolio.

He does not own any oil companies. He is concerned about environmental groups and indigenous peoples who can slow down major energy projects. He believes that more pipelines will be built, but he is doubtful that they will be built in a time frame that is helpful to today's investor. He thinks it could be 3 to 4 years before the pipeline hits the coast.

They're pulling back along with today's slide in oil prices. Well-managed. It's geographically diverse, and has 20-30% gas operations and fewer operations in the oil sands than, say, Suncor. Diversity gives you protection. He used to own CNQ. If CNQ went back to $40, he'd look at this again.

A top 10 position for him. CNQ has been a big investor in the oil sands. They've made smart acquitions. Also, oil prices have been rising. CNQ will generate a ton of cash going foward, so the dividend will rise. One of the few Canadian oil companies trading at multi-year highs. This can be a core position. He does worry about the take-away issue (lack of pipelines) and the politics around it, but CNQ is is a great long-term stock. (Analysts' price target: $54.96)

Reporting earlier this month with YOY sales up 40%. Free cash flow grew 300% to $1.4 billion. RBC noted that on a $70 WTI, CNQ will generate $70 billion cash flow in 2019. They could buy back stock. Its cash flow will outpace the
sector's. Expect 25-45% upside with rising oil prices. (Analysts' price target $54.37)

Sold off today when Shell sold its shares. The deal was done at a 3% discount, but the whole energy patch sold off today ahead of Trump's Iran announcement. She would consider this stock. Trump pulled out of the Iran deal--but the EU didn't. Oil has had a good rally, but in Canada with the lack of pipelines (like the TransMountain deadline), she won't add much oil to her portfolio until this situation is clarified.

There has been a rally in the stock recently buy now increase in model value – currently at $45.88 (implying it is fair valued now). He would wait for a pull back.

Benefitting from rising oil prices. Sold in mid-2015 given oil concerns. Maybe he sold too early. Wonderful management. Will see a ton of free cash flow as oil prices rise. Dividend nearly 3%.

(A Top Pick January 23/17 Up 17%) This is the elephant in the industry. It is a high-quality company. The heavy oil differential has still hurt them despite the improvement in oil prices. Still a core position. He thinks the differential discount will get fixed, especially once Line 3 is completed on Enbridge.

Everybody loves this stock. They produce about 10% of Canada’s total production. This is one of the best performing names in the industry. Management will probably see $2 to $3 billion of free cash flow this year, which they can use to pay down debt and buy back shares or pay dividends. He sees this as a core holding in the large cap portion of a portfolio.

Everything in Canadian oil is a purchase. Just buy and hold your nose for two years. This is the large-cap oil player he stays away from, but is well-run. They are buying long-life assets from Americans, but paying depressed prices. This
will pay off in the long term.

The dividend looks pretty safe. 63% all-in payout ratio. It has a really good balance sheet. They have 9% production growth and only trade in line with peers. Oil is risky but there are tail winds. He thinks it is time to nibble.

Most of their CAPEX is behind them, so they're enjoying cash flow, paying down debt and increasing their 3.6% yield. Not very expensive. Doing selective acqusitions. Will do even better when the gas price returns. (Analysts' price target $51.83)

CNQ-T versus SU-T. They both rank well in his model. In a rising interest rate world, energy stocks do well. CNQ ranks slightly higher as share earnings will grow 100% in 2018 with a 16 times P/E. He does not own either stock.