Crescent Point Energy Corp (CPG.TO)

(Top Pick Feb 29/16, Up 22.57%) Feb 25^th until May 9^th is the seasonal period of strength. We are up just past support here. But now is not the time to be in energy. He exited.

Primarily a light oil producer, about 89% oil focused. Have assets in Alberta, Saskatchewan and Utah. Has gone through a difficult period during the last 12 months. Cut their dividend twice and slashed their capital budget. He was adding in the $16-$17 range. Would be adding on down days like today.

Has pooh-poohed this one for about 4-5 years and got lots of hate mail for that. Hadn’t liked the business model of buying companies, raising the dividend, and then raising money to pay for it. They’ve now changed their model. Cut their dividend down to a sustainable level. Have lots of inventory and don’t need to buy any more. Large institutional investors are looking for a well-run company. This is it, and he thinks you will continue to see a massive flow of large capital going into this.

He really likes this. There was a CAP conference in Toronto 2 weeks ago, where management gave an excellent presentation. They are doing all the right things. They are in Utah and Saskatchewan, not Alberta too much. Good growth. Cut the dividend down to where, even at strip pricing in the $30s, they would be profitable and generate some free cash flow. Thinks it goes to $24-$25 if oil goes sideways, and higher than that if oil goes higher.

It has transitioned from a high payout stock and found religion in managing their dividend. Investors are very interested in this one. It was punished. This is kind of a goto name for oil beta. If you believe in the energy rally this is posed to outperform the XEG-T ETF.

Probability of foreign entities taking out a major producer like this? Thinks this is probably a good idea, but these are the kinds of things that are not going to happen very quickly. This company has done a great job on their hedge book, and still have $1 billion of hedges. BV is $22.05. Any time a stock gets close to BV, it’s a cheap story, and any time you see this trading below BV he thinks it is a great buy. This company is very astute.

Of the key themes in this market is something called beta. Resources and basic materials have been part of that. This stock is really, so far, a retracement of some of the losses over the last 2 years. When you have a bust, things may go down 65%-70%, which oil did, and will very often have as much is a 50% bounce off the bottom, as people go looking for the money they lost on the way down. You have to go through a long period of restructuring in the industry before you ever get a sustainable rally. This company built its business on growth, making acquisitions and growing their production, but they don’t have a balance sheet to make those kinds of accretive acquisitions today, so it is going to be difficult. You’re not going to get hurt too badly right, but he would prefer longer-term to look at a different sector.

(Market Call Minute.) Would rate this as a half-buy given his views on energy and their great long-life assets.

Don’t think about it as a dividend payer. They are more interested in institutional money. As oil appreciates they can grow faster than consensus would say. Money will come out of companies like SU-T and much of it will go into this company.

This is on his list. The reduction in their dividend was a really meaningful step. In effect management is saying that they cannot pay this out anymore. This could be one of the better names coming out of this environment. Have great assets. Also, have not borrowed as heavily as other companies. He would be a buyer at the right price.

He owns a little. They finally reduced their dividend to a much more manageable level. It shows management can act prudently. This one still looks a little expensive at these levels. They are a well managed company.

They are making money here and just slashed their dividend. They can make acquisitions without issuing equity now. He thinks they will acquire to increase earnings per share.

(Market Call Minute.) This is his only oil holding, and he would be a buyer under $18.

Don’t sell it. Don’t buy more. The problem is that the production was 176k barrels last year and they expect to do 165k this year. They reduced their dividend to 2%. Their valuation is lower than their peers. He would slightly underweight this stock in a portfolio.

These are cyclical stocks, so to buy something at the bottom really looks bad. When oil went below $30, no company in Canada was making money. If paying a dividend when you don’t make money and you don’t know how long it is going to be, no company should be paying a dividend. He likes this company, and if he gets his stars to line up correctly, he is probably going to own this again. The best company with oil leverage to get out of this situation.