Pembina Pipeline Corp (PPL.TO)

Has some commodity exposure: frack spread. But he thinks it is a very high quality business. There is still a significant cap x program for them to drive organic growth. When it slows down you will see more acquisitions for growth. There is great value here. It is just a matter of what you want to get exposure to. It is great value.

This is a sector that he has never sold in this decline. It will be a good entry point come January.

It is too soon to get into it. Mid-stream players saw their valuations go way up in the search for dividends. Then they moved up higher because of the growth rates. But only a portion of the projects are secured. There is risk that the valuations could contract.

A really good company. In the last 5 years, it has been one of the best performing stocks in the country, and has done extremely well. Has done well in the last year because of momentum. There is a lot of momentum money run by a a lot of managers, who just look for stocks that are meeting or beating expectations. That is the caution with this stock. It was doing this for a long time and is now facing a pullback in the energy sector. Pipeline companies are much more stable than E&P companies, but they will pull back on sentiment with them. Feels there is more pullback to happen. Feels this is on its way to $30, so he would be a little bit cautious.

Has been hit very hard with the decline in crude prices. Have a lot of projects in their backlog, and those projects have long-term “take or pay” service agreements in place, so they are fairly protected. Even if crude oil prices drop, these projects are there and they have customers that have made commitments to make payments to them. This will become a much more defensive cash flow story. She doesn’t see this as being at risk for the next couple of years. Feels the dividend is safe.

He sold out a while ago on valuation. It is experiencing contracted earnings. It will be fine over time, however. There may be more pressure on it in the near term.

Some of the servicing agencies have taken quite a beating. He can see people hitting the fracers and the drillers, etc., but the pipelines are gatherers, and transport both oil and gas liquids. They have an essential part in that whole transportation system, mainly in Alberta and Saskatchewan. This company has long-term contracts with big names. They have built up a backlog of projects that are coming on stream. Forecasts for EBITDA next year is up 19%. Dividend yield of 4.35%.

A midstream operator and is an energy investment. Had a nice run over the course of the last 12 months. Pays a good dividend and should increase it nicely. Lots of growth projects. Good balance sheet.

We are going through some unusually large price changes now. Longer term, these types of companies are mid streamers, so the way basins have been reconfigured for new technology, means we have to rebuild many parts of the infrastructure in North America. This company is participating in this huge build out in infrastructure. It will last for many years to come.

This has recently been one of the weaker performers in the group. Because of this, he has reduced his position substantially. In the long run, this is a great industry, because they are long life assets, with long contracts and very little commodity exposure. In the short term they can be impacted psychologically. If you own, consider trimming this or selling it.

They have more exposure to commodity prices than IPL-T. He likes it and adds it for new clients coming in. 4% dividend.

Pembina (PPL-T) or Inter Pipeline (IPL-T)? Every investor in this country has to own one or the other. Charts are looking really good. This one has outperformed IPL year to date.

As we are entering all this volatility, you have to have a strategy of stop losses. The only issue here is that the yield is fairly low now. This is a good time to trim some back. He would rather be looking at other sectors where you get a little bit higher yield. Utility would be a better place to be. He would also rather be holding cash for now. (See Top Picks.)

Not sensitive to the price of oil, it is more of a volume game. They have booked a lot of new projects which all depend on energy prices. He can sleep a night owning a company like this or a Keyera (KEY-T), given their irreplaceable assets and their good growth. Valuations were a little high, and maybe that is why it has pulled back.

Which pipelines should he buy? His favourites have been in the juniors, Pembina (PPL-T) and Inter Pipeline (IPL-T). Likes these because they operate virtually all in Alberta and somewhat in Saskatchewan and BC. They don’t face the kind of political problems that the larger ones do. Will probably show better growth in a reasonable market and he would say either of these 2. They give reasonable dividends and good growth potential.