Suncor Energy Inc (SU.TO)

You want to be a trader, because of the downgrade of the sector for a couple of years. $28ish is good value. You won’t make money if you just buy and hold.

Management is planning on growing the business to be profitable. Return on assets, return on capital and return on equity is to become a core discipline at the company.

Company has been hit by the high and variable costs of the oil sands. It traded at around $23 in 2011. BV is around $26.20 at the end of Q3. Any time you see the stock below BV, it is a fabulous Buy. He would use a low $30 target for the next 6 months.

(Top Pick July 6/11, Up 9.09%) Still owns it. It is probably the most undervalued of the integrateds. Costs are in line and everything is working out for them. It is really basing in there.

(Top Pick Dec 2/11, Up 9.84%)

1.6% yield. A dividend grower. Low decline rates and does not have to spend a lot of capital to keep its production flat. Expects significant capital gains.

Issue is the price they are getting for oil and the cost of the oil sands if very expensive. Difficult for these companies and something has to give.

Offers compelling value. Canada’s largest integrated oil company. Downstream operations are doing very well. Doing well on the retail side. They are a very strong generator of cash flow. Production profile over the next few years indicates significant growth.

Have very rich refining margins. Very resistant to falling oil prices. Pretty cheap at around 5X enterprise value to discounted adjusted cash flow. Doing a great job of focusing on shareholder value. Just boosted their dividend, huge shareholder buyback, new religion in cost control. Wouldn’t buy more because regardless of who wins in the US election, there will be steadily more oil being produced over the next number of years. (See Top Picks.)

Has been tremendously volatile. You have to trade energy stocks. With oil prices pulling back a lot of stocks have NOT pulled back, so maybe we are okay. Oil prices may bounce back over the next three months and then take some money off the table.

(A Top Pick Oct 24/11. Up 12.61%.) Big integrated oil companies are benefiting greatly from their refining and marketing operations. Profitability is going up.

(Top Pick Oct 28/11, Up 21.72%) Added to it recently. Refining margins did help a lot in the past quarter. Now focused on profitable growth rather than growth straight up. Great lever play on oil and their operations are good.

(A Top Pick Nov 14/11. Up 8.84%.) Would have thought the stock would have done a lot better a lot earlier. A breakout on oil prices would help. New CEO has put more emphasis on returns and profitable growth. Have a lot of free cash flow.

There is seasonality in the oil/gas business and patterns are fairly well known by investors and is sort of implicitly built into the prices. He doesn’t own a lot of oil/gas stocks. Trying to predict the oil price over the short-term is very difficult. Looks like the supply has actually been more than was thought this year, in the US in particular. There is this geopolitical price because of potential conflicts in the Middle East. This is one of the blue chip names in the sector and this one would be a pretty good bet if you like this sector.

Integrated. Has a lot of clout in the oil sands and has been performing quite well. Integrated aspect of it has been positive. Good solid company. Doesn’t see it as a real growth situation or income situation so he has gone elsewhere for growth in oils.