Suncor Energy Inc (SU.TO)

With the company completing their major maintenance projects, he believes the returns will come. It will come down to where oil prices go. It has out-performed most of the other oil and gas stocks. He thinks the fact they have made their major capital investments, they can now sit back and reap the benefits.

The Cadillac of the oil patch. They have a lot of refining, so that's a natural hedge, with all this worry about getting Canadian oil to the U.S. They've made good purchases. The stock has gone down, but $48-50 is a good place to buy. Generates a lot of cash flow.

Asked to compare her level of interest in Suncor versus pipeline companies, she said that at this time, she prefers pipelines and infrastructure plays to producers. She owns Enbridge and Pembina.

Suncor has dealt with two difficult years in the patch. They have a strong balance sheet. We need money to flow back into the energy sector to get things moving. As the biggest in the sector they will benefit first. If you think oil is going to $50, then this is not a buy.

(A Top Pick July 7/17, Up 50%) It does not always perform like it has over the last year but it was a value play. It is among the more conservative ways to play the oil space. It is integrated so you have some diversification. It is one of the only commodity names he owns. He liked it on a valuation basis and is continuing to buy it for new clients.

In energy, he's looking outside Canada, and a portfolio needs some energy. The lack of pipelines may continue to limit Canadian energy stocks. The dividend is sustainable though.

Canadian Natural Resources (CNQ-T) vs Suncor (SU-T). Both are trophy stories of Canada. CNQ is in 2 businesses and Suncor is in 3 businesses. CNQ is in the oilsands. Suncor is in the oilsands plus the production side, and the refining business. Both are generating free cash flow. CNQ is looking at expansion in their Horizon project. Suncor has been increasing dividends and buying back stock. On weakness on either, both would be great to own.

VET-T vs. SU-T vs. CNQ–T. CNQ-T is the cheapest of the three in terms of price to book. It has a nice upside potential of 40% on current earnings, which have been rising at a nice clip. Buy the cheapest of the three.

SU-T vs. MFC-T. As interest rates rise, this is better for insurance companies. This will cease to be the case if the central banks tighten so much that it sparks a recession. These companies get hit more during economic downturns. Insurance companies will not do as well this late in the cycle.

(A Top Pick May 9/17, Up 30%) It is behaving well because of the oil price. They have long lifed assets and this thing is becoming a cash machine. The only issue is getting production out of the country. Their issue in the oil sands is a short term issue.

He thinks they have Syncrude operational issues and thinks it will continue to become more unreliable – especially now that Suncor is operating it. The refining exposure is good to battle with heavy oil differentials. He prefers CNQ-T based on free cash flow and dividend growth.

He views this as the largest energy company in Canada and suggests it will react to positive cash flows faster than any other energy stock and sees the balance sheet as well balanced. He likes holding it, but he has gone lower down to the smaller cap energy stocks to get a better yield, such as Vermilion (VET-T). (Analysts’ price target is $57.67)

Suncor vs. Husky (HSE -T) Which has more room to grow? Both in same wheelhouse. Both have done well in downturn, Suncor a bit better, with decent dividend, good free cash flow, buying back stock. You could own Suncor and be happy. If you want the income, go with Suncor. Husky has less actual growth, but more upside, so if you want the appreciation go with Husky. You can’t lose with either, they’re both great.

There was unwelcomed news earlier in the week that took a facility off line in the oil sands until later in July. They are a pioneer in Canada. They have a 36 year reserve life so one month of lost production is nothing. They produce crude oil and then upgrade it and refine it. This integration and their refineries and network of 1750 gas stations allows them to avoid the vagaries of oil price variations. Their capital expenditures are stepping down meaningfully this year. This facilitates their ongoing pace of dividend growth and allows the buyback of more shares. (Analysts’ target: $57.35).

He thinks the company will peak at 58 and might pull back to $42, which is where he would buy it. PAST TOP PICK