Crescent Point Energy Corp (CPG.TO)

(Market Call Minute) It will rebound nicely eventually.

Owns a bit of this in some of her client’s portfolios from before the energy prices started to fall apart in 2014. The stock has done very poorly on the reflection of energy prices, but also has underperformed its peers. When energy troughed out in February 2016 at $26-$27, this was around $16. Now energy is up $47 and the stock is at $9. Their balance sheet is relatively strong. They have an attractive yield and she doesn’t anticipate that they are going to cut the dividend unless there is continued weakness in crude oil prices. Dividend yield of 4.2%.

At some point it will find the floor. He watches it because it is so badly beaten up. He will study it for 6 months. They took on a tremendous amount of debt. It could go down a fair amount from here. This is his kind of company to watch and possibly buy.

The stock price has fallen below his EBV -3, which he calls going into the blue. The market is saying that the balance sheet isn’t what is stated, so there will have to be write offs, etc. With the amount of acquisitions they’ve done, there is probably a lot of goodwill that the market doesn’t like. He would avoid this.

Energy has a period of seasonal strength from late January through to the end of May. It didn’t happen this year. Chart shows that it not only developed a downward trend, it has been underperforming the rest of the oil stocks in general. So far, we have yet to see any signs of the stock bottoming.

This is cheap. BV is over $17. They announced the results for Q2, 90% oil, 175,600 BOE’s day. They have net income of $.15 versus a loss of $.45 a year ago. The problem is, they have $4 billion in debt. If the price of oil goes down, how do they service the debt and how do they keep their volumes up. They are on a treadmill trying to keep their numbers up. If the price of oil comes down by $10-$15, they are not going to be able to keep that treadmill up. If oil goes below $40 like he expects, you will be able to buy the stock at under $8.

(A Top Pick July 8/16. Down 49.62%.) The recovery in oil prices has been a lot slower than he had anticipated. The company is well-run. They can make money at present oil prices.

It continues to decline. He thinks it is closer to the bottom than the top in oil and he has a small weight in Energy and is starting to get in. Energy is always a trade. Sell it when times are good. Don’t be in a rush to put money in.

For the past 5 years, the balance sheet has been slowly slipping away. That is because of the huge volatility of energy pricing. The whole oil stock complex is cheap on a Price to Book basis. However, when you value them on an earnings basis, they are not. Oil pricing keep slipping lower and lower. On this company, the PE is 50, and it is currently trading at a Price to Book of 50%.

If you own this, he would Sell it. Get your tax loss and move on to another name which has more upside. Management has clearly struggled for a couple of years to regain investor confidence after several stock issuances, that came with mixed messaging. There is just too much history to see this one outperform.

Historically it was the darling. It continued to expand production as energy prices went up. It did a lot of financing to fund its dividend and its expansion program. Then when energy prices came down it did not fare well and later did not recover with the price of energy. He does not know what is going to drive it higher from here.

On a payout basis, it has a modest 12% of 4th quarter trailing cash flow, so it looks like the dividend is sustainable. Cash flow for 2017 is expected to be pretty reasonable at $3, with about a 10% increase next year to $3.36. Because there is growth, it looks like the dividend is sustainable. If oil has bottomed at $42 and heads towards $50, there is a reasonable opportunity. Dividend yield of 3.9%.

Some clients hold this from a couple of years ago, and she hasn’t bought for new clients. She is waiting for energy prices to stabilize and to see a drawdown in inventory. This company is primarily oil, so the share price is going to be dictated by where oil goes. Like many other companies, they cut their dividend in the last downturn. Their balance sheet is in pretty good shape, so if energy stays at these levels and doesn’t fall further, they could probably maintain that dividend. Dividend yield of 4.07%.

Has been disappointed by their performance over the last period, but mostly because the commodity price has been disappointing as well. Believes there is going to be upside in the commodity price. This company has done well changing from their past, not doing as many acquisitions and focused more on organic growth. Feels this has a lot of torque to the upside, and the balance sheet is reasonable. Anything over $40 in oil, and this company will be okay. Good place to be for the upside.

He would not be Short this. If you are Bullish on crude, this would be a pretty interesting name to own. Their assets in the Saskatchewan Bakken is very good and they have a dominant position there. The company is out of favour with institutional investors after constantly raising equity. It screens quite cheaply now.