Inter Pipeline (IPL.TO)

(Market Call Minute) Good growth prospects and the valuation is at least as good as the rest of the sector. Be patient with it. It is a good company.

(Top Pick Aug 28/13, Up 52.89%) A core holding. The question is what they are going to do with all their cash.

Pipelines like Enbridge (ENB-T), Pembina (PPL-T) and this one have become expensive and have run well ahead of his FMV metrics. Also, one or two are paying out more than they are earning. These 3 have been bubbled up to a very high valuation. TransCanada (TRP-T), which has been ignored by the pack, and has been running up against one of its own structural resistant levels at 2X BV, has sneaked over the line and has had a nice little run. His guess is that the stocks will hold up and are not going to go into any kind of prolonged funk.

The recent drop in the stock is just a pullback, because they have some growth in behind the company. This is a case of just don’t buy the yield, but Buy something with growth behind it. They are growing and expanding and entering new markets, as well as paying you a wonderful yield. You need both going forward.

(Top Pick Oct 3/13, Up 56.37%) Still a long term hold, although he paired it back to remain no more than 5% of clients’ portfolios.

Some of the recent activity has to do with the speculation about TransCanada (TRP-T) and the possible hedge fund activity. He takes a longer-term view on these companies and is constructive about the whole midmarket space. Thinks there is a lot of money to be made in this area.

A very high quality company. A low risk business model. Dividend is safe. Sees their cash flow growing over the next couple of years, in excess of 11%. He is modelling 7% dividend growth. However, one of the knocks against this name is that it doesn’t have a lot of visibility post 2016, once their Cold Lakes contract starts to dry up. Doesn’t know if he would be Buying right now. Would prefer Pembina (PPL-T) that has much more visible growth, or Enbridge (ENB-T) that has a lower valuation with an 11% growth as far out as the eye can see.

He doesn’t see it moving much to the up side in the short term. Very good long term hold with good growth potential. He suggested the caller take some partial profits here.

Historically these pipelines are expensive. Interest rates have been falling for some time and now the Fed is saying that next year they could be looking at tightening if things go well. However, backlogs are bigger than she has seen in the last 25 years. Because of this, they deserve a higher valuation. Pipelines in general have growth potential and growth in earnings and they have huge dividends. You want to buy these opportunistically.

A crazy thing happened to these utilities. The valuations have doubled. They are now at 20 times earnings. It is because interest rates are down and yet there is growth. They are at capacity and have the pipelines to the oil sands. He struggles with the valuation but feels they are worth another 10%. It is a core position. It is not wrong to take some profits if you have made a lot on it.

Likes how they are positioned and thinks they are going to continue to grow their dividends by 3%-5% every year.

We have been seeing good news coming from this company lately. Phase 1 of Polaris has now been completed and they are going into phase 2, and will soon reach the Edmonton hub. They have potential for more infrastructure building over the next few years. Expects they will expand more in mid-Saskatchewan. Have become less commodity sensitive and more and more of their revenues are far more stable than they were. Dividend yield of 3.6%.

(Market Call Minute) It is always a buy.

Yield has gone down because of price appreciation, but they increase the dividend every year. They have a lot of projects that have long term agreements assigned to them. There is room for improved cash flow growth, well managed and so she would keep holding it.

Thinks it is a fine company, but the market is going towards more cyclical names. He suggests selling 60-70%. It is not going to go down appreciably. The downside is if interest rates go up.