Petro-Canada (PCA.TO) Buy, Sell or Hold

Petro-Canada (PCA.TO)

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33 watching

HOLD

Lots of cash will be sucked up into the oil sands development for the next several years. Has a history of not being great on meeting guidance and street expectation on the upstream. Did have 3 good quarters in a row, which looked encouraging, but in the last quarter finding and development costs escalated. Cheap on an earnings multiple bases, but treat it as a Hold.

HOLD

Very frustrating company for a long period of time. A value play in what some call a “value trap”. One of the knocks is that it has so many different resource plays going on at once and is not focused enough. Have some great resources and assets. Had some cost overrun problems. Would prefer Suncor (SU-T) but if you own, he wouldn't be a seller.

SELL

Wouldn't touch with a 10-foot pole. Doesn't like management. They have never done things right in his view.

TOP PICK

(A Top Pick Mar 8/07. Up 17%.) Buy it, put it away for a year and you should do all right. His model price is $78.95, a 60% positive differential.

DON'T BUY

Classic value trap to some degree. Trades at a discount to its peer group. Under performed. Operates in North America and the North Sea. Hasn't delivered on per-share growth. Fort Hills is a mega project at $15 billion which he expects them to sanction at the end of this year. It will take up a lot of their resources and capital and set them up for growth down the road. Really having trouble seeing growth in the next 12 to 18 months.

DON'T BUY

This is trendless. It hasn't gone anywhere. Has basically gone sideways since the middle of 2005. In a trendless market, it is a trader's market. You want to buy Low and sell High. You should have some rules about what Low is. Use a short-term chart to see what the trading range should be. In this case, unfortunately, the January low has been taken out indicating it is still in a downtrend.

COMMENT

Have had a bad case of over promising and bad deliverance and the market does not like that. Until they start to over deliver and under promise, the stock will probably continue to lag. Great assets.

HOLD

(Market Call Minute.) They are betting solely on the downstream and have historically disappointed on the upstream, which seems to be the case going forward.

DON'T BUY

A lot of the oil stocks deserve higher multiples than the market is giving them. This one is not his favourite. He didn't like their most recent numbers.

TOP PICK

Likes that they are in all facets of the energy business. Seems like it has been under a lot of pressure. Thinks it's good long-term value. If there is some plateauing of the oil prices coming out of this quarter, all the companies are going to do quite well.

PAST TOP PICK

(A Top Pick Feb 1/07. Down 5% including dividends.) Grossly mispriced. His model price is $70.52, a 63.5% positive differential. If the market still hates the stock, it will go down to $38.50 and you then back up the truck.

BUY

Has dropped with the general selloff of the market. This is now particularly cheap so gives you an opportunity. Thinks oil prices will probably stay in the current range.

DON'T BUY

Has been recommending this for some time but it has been relatively disappointing. Compared to most of the integrateds around the world, this is a very cheap stock. He had thought it would break out of that, but it still hasn't. Right now it is a “show me” stock.

BUY

Integrated oil/gas company. Has refineries, gas stations and explores for oil. This is a lot more stable and safe than others, which go up and down strictly on the price of oil.

HOLD

If he is right about the natural gas prices recovering and the material breach of $100 in oil, they will punch through that July/August high of $60.

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Petro-Canada (PCA.TO)