TC Energy (TRP.TO)

(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.

Would like it to be in the mid-$30 to be cheap enough for him to Buy. About 40% of the NAV is the TransCanada mainline, which doesn’t have any gas in it. They are changing it to oil, but they have to go through all the boxes to do so.

If keystone does not get approved then Canada needs to move oil to the east or south. The east coast pipeline will be a reality and most of the cost will be born by TRP. You will see gas prices out east come down. We will be decreasing imports of oil from off shore. There will be lots of little hurdles as it tries to go through towns.

Preferred C. In the last couple of months, spreads have widened a little but this is been a general overflow. As people indiscriminately need to sell income-producing securities, they might be selling funds that own this type of paper and the manager has no choice but to raise liquidity. It could also be ETF pressure where money is being taken out and the program has to mechanically sell. Hold steady. In the next year or 2 or 3 you will have an opportunity to get higher cash flows from a higher government of Canada bonds more than likely.

Pays a reasonable dividend which they increased. Company has a lot of potential for them. Keystone was a real stumbling point. Given the assets we have in Alberta, getting a pipeline out to salt water will happen.

This is very natural gas oriented and has gotten hit because there is not enough natural gas capacity to keep the gas lines full. In the end, providers get hit with higher toll rates. These are the dynamics and they are not working themselves out for a while. If Keystone got accepted today, the stock would get a pop but the more interesting play is the recent announcement of moving oil from West to East. Prefers Enbridge (ENB-T) but trades at 20X earnings, not cheap, but is a better class asset. So it is a “pick your poison”. Do you want the higher quality of Enbridge or TransCanada and hope that moving oil West to East works itself out.

(A Top Pick Oct 1/12. Up 8.57%.) Thinks view is that Keystone XL will go through. Feels that in the next couple of weeks you might get a positive announcement on converting the mainline. $25 billion of potential growth opportunities between now and 2018. Stock had a bit of a pull back with rising yields. They are not that sensitive to a rate increase in interest rates.

Current price for the stock does not take Keystone XL into consideration at all. (Politics in the US are impenetrable.) Likes this pipeline. Well run, nice yield and good growth. He sees demand for pipelines being in the system for decades.

(Market Call Minute.) Has sold down his holdings in the last 6 months out of fear of the impact of higher longer-term interest rates might have on the valuations. Now getting back towards buying range. If Keystone does go ahead, he thinks it will get a fillip. The negatives of Keystone are largely discounted in the price.

A very well run Canadian company, but fully valued at 22 times earnings. It is a pure dividend play and rising interest rates will put a cap on price appreciation.

Now would be an interesting time. There is a clear pullback and test of a support. You could nibble here.