Stockchase Opinions

Greg Newman Ovintiv OVV-T DON'T BUY Sep 22, 2021

Nat gas stocks have done extremely well off the bottom. This one is pricier than others. Other names are more compelling, such as TOU, PEY, ARX, or AAV.
$37.610

Stock price when the opinion was issued

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WEAK BUY

The former Encanna moved to the US. It was a disappointment to the market. During the pandemic they decided to move it to the US from where the new CEO was managing the assets. See his top picks today. It would be okay to own this as a short term play.

COMMENT
Ovintiv vs. CNQ CNQ. It's twice as big an oil producer as Ovintiv (formerly Encana), and over time has compounded more wealth for shareholders. They have similar valuations. CNQ yields over 4% and Ovintiv at 1.9%. Have similar credit ratings. However, CNQ has way more oil in the ground to pump. That said, he is fading oil and gas in his portfolio.
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Curated by Michael O'Reilly since 2020.
1550+ opinions with 4.81 rating (one of the best performing expert).

TOP PICK
Stockchase Research Editor: Michael O'Reilly

OVV holds highly productive assets in the Montney, Anadarko and Permian basins.  They have worked hard to optimize assets following the acquisition of Newfield in 2019.  We like that it has maintained cash reserves while reducing debt and it trades under 2x book value.  The dividend is backed by a payout ratio under 10% of cash flow.  We recommend placing a stop-loss at $49, looking to achieve $81 -- upside potential of 29%.  Yield 2.1%

(Analysts’ price target is $81.05)
DON'T BUY

Not a great company to own in the energy space.
Value trap where you can get better assets.
Lean on inventory with weak prospects.

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This is a Panic-proof Portfolio opinion which is available only for Premium members

Curated by Michael O'Reilly since 2020.
1550+ opinions with 4.81 rating (one of the best performing expert).

PAST TOP PICK
(A Top Pick Feb 07/23, Down 20.6%)Stockchase Research Editor: Michael O’Reilly

Our PAST TOP PICK with WOVVhas triggered its stop at $49.  To remain disciplined, we recommend covering the position at this time. 

BUY

Well run company with strong management team. Large asset base in shale plays. Excellent return on capital. Expecting further growth in energy sector. Business generating large amounts of cash flow. Would recommend buying. 

BUY
Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research

As a predictive question it is of course difficult. OVV is quite cheap and producing nice free cash flow. Positive momentum has returned to the sector. It has room for further dividend hikes. We would be comfortable holding for a while. 
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COMMENT

They refocused operations on the Montney and are pushing strong into the US (Utah, the Permian Basis). It's been rangebound like all energy stocks since 2022, but the free cash-flow yield is a high 15%. They have quality assets, but are in no-man's land (changing the company name and pushing in the US) and not a focus for Canadian energy investor and lacks the scale of US peers. That said, is a good operator run by a good CEO. Not his preferred energy name.