Suncor Energy Inc (SU.TO)

(A Top Pick Jan 9/14. Down 1.74%.) Had looked pretty good in the summer, but not so good now. When you play with commodities, this is what you have to live with. He likes this over all the other oil companies in Canada because it is vertically integrated. It not only has production, but also has refining and retailing. There are no exploration risks. Yield of 3.14%, which is not only sustainable, but might have room to go up.

Energy space has been decimated, but this one has held up much better than some of the smaller and mid-cap energy players. If you feel you have to have some energy exposure, this company’s oil sand production has operating costs in the mid-$30 and does not have to spend capital to keep its current production rates growing. A very exceptionally strong balance sheet. Also, has midstream and downstream businesses.

Canadian Natural Resources (CNQ-T) or Suncor (SU-T)? He likes both, but his preference would be this one. Both are solid and have low cost of production and will be around. 3.49% dividend yield.

Of the large ones, this one has the best balance sheet. The dividend is probably amongst the safest.

The most defensive name would be SU-T in this environment. He likes ZEO-T, but it will get re-balanced at the end of the week.

Stock vs. Stock. HSE-T vs. SU-T. There is probably more value in HSE-T over SU-T. HSE-T does not have the retail division to the extent that SU-T does. HSE-T is more over sold that SU-T.

Being integrated helps them. The crack spread helps stabilize the earnings. Strong company with good growth prospects and a good balance sheet.

Prefers the higher yielding stocks. He wouldn’t have any qualms about this. Just let a little bit more water go under the bridge. Doesn’t know how they are hedged, so doesn’t know how safe the dividend is, but they have a strong balance sheet.

Make sure you own energy stocks with rock solid balance sheets and low costs of production. They are a huge cash generating machine. They could even raise their dividend here and payout would be very, very low. They are not hurt much by oil pricing coming down and refining margins have been coming down to offset the price of oil When oil goes up, prices at the pump reflect immediately, but when it comes down, the pumps are slow to come down.

Does not see a compelling reason to own the stock in the next few weeks. They will be a leveraged proxy on the price of oil.

Canadian Natural Resources (CNQ-T) or Suncor (SU-T)? If you look at their cash flows, both companies are going to be fine at $70 oil. Slashed their growth budgets, but they will make it. He likes both of them.

If oil gets knocked down even more, he would look to buy it. This is a quality company and you need quality in this oil environment. A well run company.

3 to 5 year hold? He would see lots of growth over that length of time and it is a good idea to invest with that time horizon in mind. This company has long reserves and a lot of optionality in terms of its property as well as a lot of growth. With this long-term horizon, you can’t go wrong.

He is a big believer in this one. A good way to play the oil patch from an integrated perspective. You have everything from conventional oil sands to upstream and downstream. Extremely well-managed. On the multiple pieces, it looks pretty reasonable at these levels. If you look out over the next year or 2, it is selling at around 6X cash flow and 10-12 times earnings, which is quite reasonable. Because it is in the energy sector, there might be some volatility in the short term.

If you want to own a large cap name in Canada, the energy sector is representing good value here. He has quite a bit of energy exposure, although he doesn’t own this one. If you want to own a large cap major, this would be the one. Likes what management is doing. They are paying attention and focusing on cost of capital. They’re not just pursuing growth for the sake of growth. They are buying back their stock when they think that they can't make investments in industries. Global supply is about 93 million barrels a day and global demand is about 93 million barrels a day. They are both growing at about 1.5%. There has been a downtick in growth recently. The large cap oil sands producers have been pursuing these large-scale mining operations and this company has done an excellent job of doing it. Reasonably expensive barrels of oil, and they run for long, long periods of time.