Suncor Energy Inc (SU.TO)

This has tended to be a favourite in the US which is probably one of the reasons why it has been pounded so badly. It has a lot of heavy oil and that is where price stability is these days. Thinks it is in a Buy range here.

We broke a 12 year trend in commodities. Oil has followed. He prefers companies that benefit from falling oil prices.

Canada’s largest integrated oil/gas company. With energy being hit the way it has, this is a really good opportunity to step in. We are going to see some cash flow estimates come down, but nonetheless, this company should be earning around $5 or $5 plus cash flow over the next couple of years. A very inexpensive stock. You are getting the benefit of both the upstream and the downstream operations. Dividend yield of 2.99%.

Solid management and a very good allocator of capital. Expects there will be dividend increases over time. The beauty with oil sands projects and oil sands operators is that once they spend capital to get a project going, there is very little decline and very little maintenance capital to be spent. You will see this company building more projects and expanding, but there will be a significant amount of cash flow being returned to shareholders in the form of dividends.

This is on her Watch List. All of the oil producers have come back quite a bit. This is probably the best name for oil sands exposure. This becomes a call on crude, which she thinks is near the floor.

They are shedding assets that they deem to be non-core, which has done them well over the past year plus. Focused on the oil sands and long-term assets. Have done dispositions to help their balance sheet and rewarding shareholders. He can definitely see a time when he would be an owner of this.

He sold his COS-T to decrease his exposure to oil. This is his remaining exposure to oil sands. As much as environmentalists are trying to shut down additional pipelines, he feels oil will go out via other means. Don’t hold a huge position.

With oil by rail, maybe Keystone does not matter. They are a refiner with upstream and downstream operations. This is a very conservative company. They had very good dividend increases. Worth buying here.

Likes that they have a very integrated strategy. They can access non-North American pricing for 90% of their product. Growth in cash flow over the next number of years is tremendous. The one knock is Fort Hills, but it is still a high quality project that will work for them over the long term.

Suncor (SU-T) or Canadian Natural Resources (CNQ-T) for the growth? These are both excellent choices. Thinks CNQ is slightly better. This one throws off huge free cash flow growth and you are going to have nice dividend growth as a result. A quality name and a good balance sheet. (See Top Picks.)

(A Top Pick Oct 15/13. Up 18.72%.) His model price is $79, an upside of 81%. He is willing to be patient and wait for the value to be created.

Switch to another oil such as Canadian Natural Resources (CNQ-T)? These are 2 really good companies. Both are very well run and if you wanted to own 2 large cap names, these would be the 2 you want to own. Doesn’t think the trade would be worth it because of the possible tax implications and transaction costs.

It is more of a gas play. You are playing the winter weather story. He would not necessarily be selling although he reduced his position recently. It is stable and generates a lot of cash flows. He would not throw more money at it, however.

Likes it. Even though he thinks oil prices are vulnerable, SU-T looks attractive in the long term. You can expect very good dividend growth going forward.

Looking for increasing free cash flow generation with their good production growth. Also, thinks the dividend will increase over time. This is a great story to own. An integrated, so they have upstream production as well as the downstream integrated. In the event of volatile oil prices, they make money on the downstream.