Gibson Energy (GEI.TO)

Had a big fall from January until July/Aug, and now there is a bit of a turnaround. Oil has to move somehow, which is the primary driver of this company’s business. If there continues to be a pickup in energy, this is going to get some pickup along with that. Prefers pipelines which have less volatility. You could continue to hold this for the next 6-12 months and probably get some pickup. Dividend yield of 7.6%.

They are more transportation than pipeline. It is a little riskier. The dividend is safe, but the growth is a little more challenged.

These are smart guys who are shuffling the pieces around, and you have to be patient. While they are shuffling the pieces, the stock goes sideways. 50% of the hard assets are where they have the tanks, the kind of really dumb metal business that is still needed, and it is all still active. He likes their bonds and that is what he would own, where the risk/reward is really interesting.

You are basically looking at key infrastructure assets, that will do very, very well as we continue to expand the oil sands, tank storage in particular. Those are crucial assets that would be very, very difficult to replace. There are better names to own in the area, in between the pipeline and the producer. The dividend is high, and they are going to have to grow into that. At this stage, he thinks you can find companies that have already done the growing of the dividend.

It is a small short for him. Poor valuation and not a lot of return on equity or cash flow. Their balance sheet is not in particularly good shape.

(Top Pick Feb 10/16, Up 41%) She likes it because of the way it is changing and evolving. It is leaning more toward the infrastructure business. This is a very stable type business. She sees upside when oil prices come back.

He wouldn’t hold this for the long-term. It has not been consistent enough, and is at a cyclical low. However, because it is kind of moving up at the moment, he would try to get out at a little higher price.

It has an 8% yield. Price momentum is good, but part of it is because they were approached by someone. They rejected them and it has cooled off a bit. Valuation is not great. They trade at about 2 times book and they have a bit of a debt problem. They missed on recent earnings. It is a small short for him.

Energy infrastructure names that are commodity sensitive have really outperformed over the last quarter. Management says their services businesses should turn up next year. They are also growing their infrastructure businesses with 2 new storage tank projects. He sees them growing their cash flow 2018 over 2016. The bad news is that they are making absolutely no money this year in terms of EPS, and their dividend is at about 126% payout ratio on cash flow. You could buy this at around $16 and you would do okay. 7.3% dividend yield.

Just announced they are going to be selling their propane business, which is 13% of their business mix. They want to focus more on infrastructure. This is probably the most commodity focused of the energy infrastructure, so it has been very volatile. From a very low base, he is modelling that their cash flow can grow 25% between 2015 and 2017. Very good balance sheet relative to other energy infrastructure names. Not a bad little play down here all things considered. It’s one you could consider selling Puts on.