Suncor Energy Inc (SU.TO)

NDP is now the governing party in Alberta, and have never been particularly corporately friendly. However, he thinks there is enough information for the new government to not to make any huge stupid moves. They have already indicated they are not going to do anything for probably 6 months. Thinks all oil company problems are more related to the price of oil, and has become pretty convinced we are not going to see the price of oil much out of the $60 for the foreseeable future. On that basis, profit margins are squeezed, particularly the oil sands. If you want to add to this, he would do it slowly over the next several years, until we really see how this whole pricing mechanism shakes out.

(A Top Pick May 29/14. Down 10.95%.) His model price is $35. If you look at any of the companies in the oil patch, his model price and earnings are significantly below the current price.

As long as you get higher oil prices you will get growth. He pared back his oil and gas exposure over the last months. He can’t justify a full market exposure for his conservative clients. He prefers pipelines and so on.

(How will the new Alberta government affect this stock?) The reality is that we just don’t know enough. It depends on what type of government we get. Overall this is a fantastic company. Capital discipline is phenomenal. Arguably one of the best integrated oil/gas names globally.

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.