Freehold Royalties Ltd (FRU.TO)

Dividend could be cut again. It's a great company just because of their royalty structure, but she prefers PrarieSky. But it's a great way to play the current economy because they have a bit of a cushion with their royalty structure.

Because this is a royalty company, it is dependent on energy prices. If you think energy is going back to $60-$70 and trade positively, these royalty companies are great because they don’t have any operating costs. You need to be bullish on the underlying commodity. If you are not bullish, and he means $60+, then just bide your time. There is no rush to buy these things until they show you a little bit of strength.

(Market Call Minute.) Has been a big buyer in this. His big concern is that Penn West (PWT-T) is their biggest royalty payer so if it goes bankrupt, what happens to their royalty income? It is a bit of a concern, but even excluding that, the stock has been pounded, and the royalty model should hold up a lot better than a conventional A&P model.

(Top Pick Oct 2/14, Down 48.96%) Production is only off 5% from where they thought it would be. He likes the company and it is still in his top picks. This would be one of the companies he would start to tip-toe into. They have low development risk. Debt to cash flow is 1.3 times. They cover their dividend with cash flow. They should be okay through this cycle.

He is very fond of royalties. They have made aggressive moves into other kinds of things. He prefers PSK-T, however.

He added to his holdings when they did their recent equity issue. A well-managed royalty situation.

Another example of a long-term trend that has been broken. Also, had very long term support that has been broken. Chart does not look encouraging and he doubts if he would want to own it. Dividend yield of 7.4%.

We are just in the early days of volatility coming back into the market. Now you are going to see the difference between buying a stock that is not growing its earnings moving forward, compared to the last few years. If you do start to Buy or looking at it, maybe leg into it so you still have some cash to buy into it if you are wrong and it goes lower.

(Top Pick August 7, 2014, LONG Freehold Royalties down 37.94%, SHORT PrairieSky Royalty up 22.52%) Pairs trade, likes both business models. Felt that when PrairieSky came out last year it was overhyped and overvalued. PrairieSky was twice the evaluation. Prairiesky's yield was 3%, and Freehold's yield was 6%. When oil prices went down, they both went down. They exited the position in January.

One that she has considered for some time, but chose prairie PrairieSky (PSK-T) instead where she saw less risk. It doesn’t have to do any drilling by itself or rely on 3^rd parties. If looking for a safer place to be in the oil environment, this is a good one because you are getting a royalty which tends to be a lot more sustainable and a lot safer than going with a pure producer.

Just bought some today. They made an acquisition of Penn West (PWT-T) assets recently. Any time this is under $18, you get a 6.5% dividend yield. A safe way to have some energy exposure, because it is 84% royalty exposure.

One of the most interesting companies he has ever come across. The long-term trend of its BV has been steadily down. This is because the company, for years and years has been paying out a good deal more than it had earned. Because it has a very high price to book, it keeps issuing stock. When we had a bear market in 2008-2009 and the company couldn’t continue to issue stock, the share price really cratered. When it can’t execute its strategy, it is catastrophic for the owners, so keep that in mind.

We clearly have an infrastructure deficit in energy in Canada, when you look at all the stalled or questionable projects.

A royalty company which gets a percentage of revenue from anything that is produced on their land. This is a great play when oil and gas prices are rising and people are drilling like crazy. They basically have very little or no capital at risk and rely on all the other people exploring. Right now, with cutbacks in exploration budgets and cutbacks in commodity prices, the outlook is not as buoyant as it has been in the past. Pays a very nice dividend. Probably not a bad bet.

This is a much cheaper purchase of PrairieSky (PSK-T). This acquisition makes them about 84% royalty based. A low risk way to begin to add some energy weight back for him. Thinks it will get up to the low $20s. Yield of 6.08%.