TC Energy (TRP.TO)

(Top Pick Nov 2/12, Up 9.35%) Has a great growth profile ahead of it. Keystone is not in the price because investors have given up. If it sells off for a day or two, then that is an opportunity.

Have done a really good job in the last couple years of diversifying away from Keystone. Pretty attractive slate of some small to medium-size projects. Just announced a deal with the LDCs in Eastern Canada, which help to alleviate some of the problems with the mainline. Valuation is attractive relative to its peers. Has the potential to see some strong, sustained growth in earnings and dividends. Yield of 3.9%.

A lot of pipelines are getting a little stretched. This one is cheap, trading at 8.6X 2014 free cash flow yield. They have so many projects going that even if Keystone doesn’t happen, there is not much downside for it at these levels.

Somewhat interest-rate sensitive as opposed to the very big energy midstream infrastructure companies. Prefers something like Inter Pipeline (IPL-T), which has a little bit higher growth. In general, energy infrastructure is a good investment. You will get above average dividend growth. There is a little bit of news risk in this and he would prefer Enbridge (ENB-T). (See Top Picks.)

A fine holding. Like any stock, what would he replace it with to get a similar yield. A ZWU-T has 6% and has a covered call overlay. That would be something to consider. Risks aren’t zero but an awfully nice yield and over the next couple of years TRP could get back up there.

(Market call Minute) Likes the company but there are better companies in the mid-streamers.

In the event of Keystone getting approved or rejected, is it a worthwhile strategy to take a straddle position 9 months down the road? A straddle involves buying a Call Option and you will make money if the stock goes up. This also involves buying a Put Option, which will make money if the stock goes down. When you are buying both of these, you don’t care which direction the stock goes. You simply believe that it will go a greater distance than the cost of both of the options. 9 months out, you add the price of the Call and the Put to the strike price that you are willing to buy or sell the stock. That will be the trading range implied by the options. If you think the stock will reach either end of that range, based on the outcome of Keystone, then by all means, do the straddle. Your maximum risk is that it closes exactly at the midpoint, in which case both the Call and the Put will expire worthless. Chances of this happening are very small.

Not aggressively buying utilities. Some attractive in terms of what they are working on. Maybe keystone gets approved but it won’t add much to the stock. Richly priced but you can do well elsewhere. He adds CU-T instead for new clients.

Probably a good buying opportunity. Lots of negative sentiment around it, Bruce, keystone. They probably aren’t factored into the stock price any more. They have a lot of projects in the pipeline. He would buy at this level.

He is looking to add it back to the portfolio. Hansom 4% yield. 18.9% appreciation predicted for the next year. Keystone pipeline decision being postponed has held it back. But the worry about keystone is fading as we get into the concept of the west to east Canadian pipeline. Wait until this fiscal shut down issue has passed.

(A Top Pick October 1/12. Up 5.06%.) Even though Keystone will probably not be approved, they still have about $25 billion potential growth opportunities between now and 2018. Feels their earnings will almost double during that period. Had 7% dividend growth since 2000 and are in a good position to continue this. Sees them growing EPS by 11% for the next 4 years. A good deal.

(Market Call Minute.) Likes it at this price. Doesn’t think the Keystone is now the “be-all/end-all”. This makes it less risky at this price.

Midstream oil/gas company in the energy space but really acts more like a utility company with a beta of half that of the TSX. This is your pure, defensive type of play. You will probably see the stock, over time, move sideways because dividends are really not going to increase by large amounts. As interest rates move up, you’ll probably see difficulties with these types of companies.

The real key future for this company is Western Canada to the Atlantic Coast pipeline for oil. This will be a real winner. If you have patience over 5 years and the company can get its approvals, this will be a terrific stock and people won’t even worry about Keystone anymore. In the short term he doesn’t see it going anywhere. He would like to see it below $40.

When funding new projects and given that they have raised their dividends for well over a decade, they don’t want to cut their dividends or raise cash so they either have to issue more equity and dilute their common shares or issue bonds and preferred shares, increasing the levels of debt. This company generates a decent amount of cash flow from their existing projects. Have a lot of growth plans coming up so they will need to fund them. With their cash flow, they are probably not going to have to issue shares. For debt levels, you have to compare them to others in their group. You also have to look at how much they have to pay on their interest. He uses Net Debt to EBITDA and anything over the 3 to 4 mark is a red flag for him.