Suncor Energy Inc (SU.TO)

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.

If you are going to enter new positions in the oil/gas industry, you want to make sure it has a pristine balance sheet. This one is fine, but he prefers Tourmaline (TOU-T) and PowerX (?). Both have very, very strong balance sheets. PowerX (?) has no debt, cash on the balance sheet and a fully funded exploration program for 2015. Tourmaline has raised equity very judicially over the years with a very, very strong balance sheet along with a strong exploration program for this year.

He was debating about having this as a Top Pick, but some of these energy stocks have moved so aggressively bottoming in January. This one bottomed in December. Had broken a significant down trend line and we are now within the period of seasonal strength for the broad energy sector. This is no different and tends to gain all the way through to May. You want to be more towards the refiners and stay away from the drillers. Try to get it on a pullback to about $36. Loves the stock.

It is really diversified. It is integrated. It is a really great holding. Likes it, but it will be volatile like the sector. If we test lows again, then it is time to get in, but it is overbought right now.