Suncor Energy Inc (SU.TO)

It is turning a bit. The difficulty with the big integrateds is just the price of crude. You could enter at this point if you think oil is going up. He is half weighted in energy at this point and thinks they are all turning and coming back.

He likes this company. With the industry currently undergoing the problems that it has, you really want to be in the companies that are going to survive, and this is one of the more diversified companies in the oil sector. An extremely well-managed company. In the next couple of years, he is expecting that we will see cash flow in the $5 range, maybe even $6. It will be subject to some shocks going forward.

2/3^rds of revenue is from refining and marketing through Petrocan gas stations. He expects them to surprise to the upside. Technically there is a lot of overhead resistance in the $42 area. If oil prices revisit their lows then this one will fall to $35 and he really likes owning it there and then sell close to $42.

Energy stocks had a decent move recently. He likes the assets of this one. The growth profile is still there. He is not a real bull on energy stocks. He would not add to it right now, but it should be a core holding.

Great company and smart management. The problem he has is that no matter what management does or what great assets they have, they can’t control the price of oil. If oil sticks at around $50-$60 next year, it is going to be a rough time for the company. Earnings are going to be out soon and he expects them to be atrocious. Doesn’t think the dividend is in jeopardy or that the balance sheet is in trouble.

(Market Call Minute.) Likes this. If you are going to buy a basket of large caps, it would be this and Canadian Natural Resources (CNQ-T).

An integrated company, so you have more defensive characteristics. Production mix is 99% oil plus they have the oil sands side of it. Trying to bring down the cost structure at Syncrude. Cash flow is very problematic if we continue to see lower oil prices. If this got down to the low $30, it would be a great stock to have as a core holding.

This is all about oil prices. Oil companies have actually outperformed the oil price, because they are looking on a forward curve. This is one of the best managed and best asset classes for oil and gas development. In the current situation they will probably view the current situation as an opportunity to acquire cheap assets.

He doesn’t believe oil prices are at a level where they are meeting the cash costs of production, so he expects oil prices to move higher over time. The favoured way to play this sort of trade in a longer term recovery would be to go to the global large caps. This one is Canada’s super major, and at these levels it is an interesting Buy. If you use a 2-3 year time span, you are locking in a very attractive dividend at these levels.

He sold the stock. He does not really think they are making money at this price. But it was the last one he sold. It has vertical integration. They are a refiner and a retailer. If you own one, this would be it, but he doesn’t own any.

The mess should continue. SU-T should be a core holding. It is fairly valued here.

(Top Pick Mar. 24/14, Down 1.74%) It held in quite brilliantly. He put in a sell at $36 as it violated a technical condition. He thought the integrated oils would hold up much better, but it turned out not to be the case. Year over year earnings comparisons will keep hammering the stocks. He decided to cut and run.

Costs are in the $30-$32 range, and is the lowest cost Canadian oil sands producer because they started quite a while ago. The price is too high and he would not own the stock. $30 would be his entry point, and he thinks it gets there by Labour Day.

There is risk in dividends in virtually all energy companies. Dynamics have changed and oil sand producers are relatively higher cost producers. If prices were to stay down here for some time, it is going to be tough. He would recommend that you look at a different sector.

On his watch list. If he was going to increase his exposure he would do it with CNQ-T.