Opinions by John O'Connell, CFA | StockChase
1288
John O'Connell, CFA

Chairman and CEO

ON STOCKCHASE SINCE Aug 2006

Davis Rea


Opinions by John O'Connell, CFA



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2017-07-25

N/A
A Comment -- General Comments From an Expert 

Energy. Eventually oil has to be significantly higher than what it is currently trading at. Oil/gas companies in the US have been saying they can produce oil at $30-$40 a barrel. They looked back at one of the top ranked US companies, Pioneer, which lies in the middle of the Permian Basin.  They found their cash flow from operations from 2006 to 2016 were an accumulative $15 billion. Capital expenditures were $16.5 billion. That was with oil at around $78 a barrel. There was only one year where they produced positive cash flow from operations. They funded this through stock issues, debt and selling assets. That is a history of what some US and Canadian companies do. They traditionally sell assets, dilute shareholders, borrow more money, and hope for better times. They say costs are lower and productivity has improved. We are seeing a leveling out of productivity out of 3-4 years because of technology improvement. A lot of these companies sold some great Crown jewels, and have been drilling hoping for better days. Saudi Arabia and most OPEC countries need oil that is in the $80 price range, and probably higher. North American companies need at least $60 oil, just to be treading water.

John O'Connell, CFA

Chairman and CEO, Davis Rea

Price: $0.020
Owned: _N/A

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2017-07-25

TOP PICK
Accenture Ltd. (ACN-N)

The largest consulting company globally. It has morphed very nicely over the last 5 years, and has become the leading consultant towards the Internet and Cloud computing. Cloud computing is really just getting going. Companies need a lot of help in terms of analysis, and how to go about doing it and how to implement it. This is a huge free cash flow generating machine. Dividend yield of 1.9%. (Analysts price target is $133.50.)

other services
John O'Connell, CFA

Chairman and CEO, Davis Rea

Price: $128.950
Owned: Yes

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2017-07-25

COMMENT
Altagas Ltd (ALA-T)

Will the deal in the US go through? He owns the receipts, which is the right way to play this. If the deal doesn’t go through you are buying the receipts at $29 which pays a 7% dividend. If the deal doesn’t go through, you get $31 back. He thinks the deal will go through. Things are quiet because it is going through the regulatory hearings.

oil/gas
John O'Connell, CFA

Chairman and CEO, Davis Rea

Price: $29.160
Owned: Yes

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2017-07-25

COMMENT
BCE Inc. (BCE-T)

This has held in pretty well as all good dividends paying stocks did. The big issue with big telcos in general is that half their earnings, interest, tax and appreciation comes from their wire line business. That business is dying slowly. Their offset to that has been acquisitions, boosting their dividend greater than their earnings through tax strategies, their mobile strategy and their forays into advertising and sports content. This is just above investment grade and he would not call it a safe dividend stock.

telephone utilities
John O'Connell, CFA

Chairman and CEO, Davis Rea

Price: $58.170
Owned: Unknown

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2017-07-25

COMMENT
Birchcliff Energy Ltd. (BIR-T)

Should they buy Altagas’ Gordendale plant? He would be surprised if they would purchase it. A lot of energy companies try to run asset-like programs. He doesn’t think Altagas would want to sell the asset.

oil/gas
John O'Connell, CFA

Chairman and CEO, Davis Rea

Price: $6.270
Owned: Unknown

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2017-07-25

PAST TOP PICK
Celgene Corp (CELG-Q)

(A Top Pick July 6/16. Up 31.77%.) This is still a Buy. It has cancer drugs that work. Very, very profitable. Amazing balance sheet. Very, very strong management team.

Consumer Products
John O'Connell, CFA

Chairman and CEO, Davis Rea

Price: $136.440
Owned: Yes

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2017-07-25

PAST TOP PICK
Walt Disney (DIS-N)

(A Top Pick July 6/16. Up 11.12%.) A quality name, a quality franchise and well diversified. They create incredibly valuable content that has very, very long shelf life. Their parks, hotels and movie businesses are booming. He believes ESPN will eventually sort itself out. This is still a Buy.

entertainment services
John O'Connell, CFA

Chairman and CEO, Davis Rea

Price: $106.420
Owned: Yes

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2017-07-25

COMMENT
Dollarama Inc. (DOL-T)

This has done an exceptionally good job of moving up the food chain and increasing prices to $5. The strengthening Cdn$ is going to help a little, because they source a lot of their product internationally. A very, very well-run company. The one company that is not susceptible to the Amazon (AMZN-Q) potential problems. Trading at a pretty rich valuation.

Consumer Products
John O'Connell, CFA

Chairman and CEO, Davis Rea

Price: $123.050
Owned: No

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2017-07-25

COMMENT
Enbridge (ENB-T)

Has owned some of this for a long time, and the only reason he hasn’t sold it is that he doesn’t want to pay the tax. The company has been treading water and is down about 7% year to date. It has been pursuing a growth by acquisition strategy, and doing it by raising its dividend to attract investors, and selling stock to pay for the dividend. They have been selling stock endlessly for 10 years now. They’ve exhausted the investment community. Very, very complex balance sheet.

oil/gas pipelines
John O'Connell, CFA

Chairman and CEO, Davis Rea

Price: $52.130
Owned: Yes

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2017-07-25

PAST TOP PICK
Facebook (FB-Q)

(A Top Pick July 6/16. Up 42.24%.) There is a lot of running room and you can still Buy it today. Trading at pretty reasonable valuations.

John O'Connell, CFA

Chairman and CEO, Davis Rea

Price: $165.280
Owned: Yes

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2017-07-25

COMMENT
First Quantum Minerals (FM-T)

An exceptionally volatile stock. It produces copper in dangerous parts of the world. Lots of companies are having problems these days with governments, not getting good enough deals. You have to be really careful. This is going to track the Chinese stock market pretty carefully. The company is well-run. Has a lot of debt. If you are going to invest in stocks like this, make sure it is the appropriate amount in your portfolio and don’t own too much.

integrated mines
John O'Connell, CFA

Chairman and CEO, Davis Rea

Price: $14.000
Owned: Unknown

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2017-07-25

COMMENT
General Electric (GE-N)

Probably interesting, but it does have a “cash flow versus liability problem” for the time being, based on its dividend. It sold off a lot of assets so it pared its balance sheet to pay down debt. It is struggling through the problem of selling one thing, and making sure what they have allows them to grow. It has a good dividend, but presently is not earning enough to pay that. You have to question why they are paying a dividend.

electrical/electronic
John O'Connell, CFA

Chairman and CEO, Davis Rea

Price: $25.440
Owned: No

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2017-07-25

TOP PICK
Goldman Sachs (GS-N)

Just reported record earnings and profits. They have a strong capital management team. We have gone through 8 years of a financial mania, conglomeration and low interest rates. At some point that is going to reverse itself and this leading investment bank is going to help the companies get themselves out of trouble that they have put themselves in. Dividend yield of 1.4%. (Analysts price target is $241.50.)

investment companies/funds
John O'Connell, CFA

Chairman and CEO, Davis Rea

Price: $221.580
Owned: Yes

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2017-07-25

COMMENT
goeasy (GSY-T)

Why would you want to be lending money to a society that is already one of the most indebted societies of the world, Canada, to the most disadvantaged people that are the least capable of paying their loans? The company makes its money selling couches and TVs, and lending them money to do so. Lending money to generate sales is never a good idea.

merchandising/lodging
John O'Connell, CFA

Chairman and CEO, Davis Rea

Price: $28.000
Owned: No

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2017-07-25

BUY
Kelt Exploration (KEL-T)

An exceptionally strong management team. A good solid balance sheet and a low-cost resource. They own a lot of their infrastructure and have access to many different outputs should one break down. Management team has shifted from being an exploration company to more of a development program. They’ve proven up reserves which are very, very substantial, and well delineated. Their natural gas is very liquids rich, and the wells they are drilling have been very extensive. He thinks this company is easily a double in a more normal energy price environment. Really strong management team which owns about 20% of the company.

oil/gas
John O'Connell, CFA

Chairman and CEO, Davis Rea

Price: $6.560
Owned: Yes

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