Pembina Pipeline Corp (PPL.TO)

A pipeline. He sold this out of his equity platform. His equity platform objective is to outperform the stock market and he doesn’t think this is going to outperform the stock market. However, he still has it in income oriented accounts, because it pays about a 4% dividend and is a relatively stable stock. A well-run company. Probably doesn’t have a huge downside from current levels.

Very expensive. His bet is that a year from now this will be significantly lower.

This sector as a whole has held in remarkably well, especially given what the producers have done. The smaller companies like this are better positioned. Given what has happened to the oil price and the producers, there is a potential risk that sooner or later is a number of projects these companies go into will grind to a bit of a halt.

At an interesting entry point. If you are looking to build a position over a long time, you might want to get into this a little bit. This is the largest among the Canadian peers. Have about $6 billion of secured CapX program over the next 3 years, which is going to double their EBITDA. Great management team.

It has come down quite a bit, but he likes the assets. They touch more than half the oil moving around Alberta. They have assets where he expects development to continue. They have a decent dividend and decent growth prospects. If we run into more troubled commodity prices for longer there will be pressure on the stock price, but as for the information they have now, it is in the stock price.

(Top Pick Mar 10/14, Up 7.72% total return) Not a lot of commodity risk. They are a toll road. It is an income pick. The price of the stock will not move radically up or down. They are trading off yield.

Believes this is on sale at these levels. There was some concern about the company because of cost of service. Good CapX program with $1.5 billion this year coming on stream. Another $6 billion in the next 3 years. Their cost of service business is about 70% of their cash flow, and with these projects and re-contracting this gets up to about 80% 3 years out. Yield of 4.47%.

Loves this pipeline. These are great companies. They are to report in a couple of weeks.

Has always been an admirer of some of these pipeline stocks. At the current level, it seems a bit overvalued. Dividend quality is stronger now given the pullback in the stock. Mid-$30 would be a good entry point.

He is still buying it. The key point is that 30% of mid stream business is commodity price sensitive. Management is going to reduce that to less than 20% over the next few years. It is a great dividend stock going forward.

No problems from an operational point of view, but his problem with the pipelines is valuation. 20 times earnings for 5% earnings growth. They benefited from the run to safety and this will run out in the next couple of years.

Dividend is safe. The group, by association with oil, has been hit. This one has exposure to gas growth in Western Canada, which now is a little dicier for LNG further out, so there is a little bit of bloom off of the growth. It is still going to be fine, but it was trading at a huge valuation, so it had to come off. In the short term, it will go up and down with oil/gas prices, and the stock will probably go sideways.

End of January until May of each year is the seasonal strength. Hold it as it makes a base. Or wait for technicals to be in your favour.

Energy has more of an indirect relationship to their natural gas exposure. They have been making a lot of money in the last few years, taking liquids out of natural gas. That business has been hurt to some extent, but the good news is that they have been rapidly reorganizing their business towards “cost of service” type contracts. Thinks they will get through this. They have less risk on the commodity side than they used to. If you don’t own any of these stocks, it is time to look at them.

Really likes the entrepreneurial and midstream pipelines, because they tend to do smaller projects, generally within one province which can get much more readily approved. Has owned this for a long time and thinks the yield is sustainable. It will be affected by the drop in the oil price and any movement in the price of gas, but it will only be affected in an impairment kind of way if this drop goes on for a considerable period of time.