Opinions by Bill Harris, CFA | StockChase
1333
Bill Harris, CFA

Portfolio Manager

ON STOCKCHASE SINCE Jun 2003

Avenue Investment Management


Opinions by Bill Harris, CFA


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2017-06-14

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

Resources. After the Asian flu/Russian debt crisis in 1998, you also had the original Internet boom, and no one cared about resources. We are now at a point where we finally have legitimate good valuations. 5 years ago, we were playing defence because valuations were not there. We have now recovered from that and are now in an environment that we can get really excited about. Businesses are getting incrementally better and are throwing cash flow, and you don’t have to pay a lot for them. Resource stocks are “crazy” out of favour, which is great. 12-18 months from now, the supply stabilizes and demand keeps growing.

Bill Harris, CFA

Portfolio Manager, Avenue Investment Management

Price: $0.020
Owned: _N/A

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2017-06-14

TOP PICK
Altagas Ltd (ALA-T)

Planning a big US acquisition and will take on a lot of debt. The market seems worried that they can’t beat the index by owning this over the next 18 months. It looks like they should be able to do the acquisition. The dividend yield is 6.9%, which he gets up front. If he is trying to beat an index, this is not good, but if he is just trying to make money, this is fantastic. (Analysts’ price target is $35.)

oil/gas
Bill Harris, CFA

Portfolio Manager, Avenue Investment Management

Price: $30.050
Owned: Yes

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2017-06-14

COMMENT
Baytex Energy Corp (BTE-T)

He doesn’t own this because of the level of debt, and he doesn’t know how volatile the stock is going to be. However, he owns the bonds which he bought at a discount. With the bonds, whether the company is solvent or insolvent, he is going to get paid back his bonds.

oil/gas
Bill Harris, CFA

Portfolio Manager, Avenue Investment Management

Price: $3.480
Owned: No

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2017-06-14

COMMENT
Cardinal Energy Ltd (CJ-T)

Has done a very good job, but probably need a slightly higher oil price to make the numbers work. They just completely blew the financing. When that happens and there is nothing particularly wrong with the company or the acquisition, it’s a “prove me” acquisition and you need a slightly higher oil price. This could go sideways for a bit or go lower.

oil/gas
Bill Harris, CFA

Portfolio Manager, Avenue Investment Management

Price: $4.870
Owned: No

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2017-06-14

TOP PICK
Canadian Natural Rsrcs (CNQ-T)

As energy pulled off, he added to this in the last 48 hours. In a perfect world, he would have waited until it was in the low $30s. Likes the acquisition they’ve done. With the positive energy outlook, he thinks it will throw off fantastic amounts of money in a couple of year’s time. In this bad market, this is one he would add to. Dividend yield of 2.8%. (Analysts’ price target is $52.50.)

oil/gas
Bill Harris, CFA

Portfolio Manager, Avenue Investment Management

Price: $37.360
Owned: Yes

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2017-06-14

COMMENT
Crescent Point Energy Corp (CPG-T)

Their execution over the past 12 months has not been great, and the stock market is not very patient. He is just coming around now to look at this, because it just might get too cheap. The impression is that their operating issues are fixable and they are fixing them, but you are not seeing it in the numbers yet.

oil/gas
Bill Harris, CFA

Portfolio Manager, Avenue Investment Management

Price: $11.170
Owned: No

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2017-06-14

COMMENT
Cenovus Energy (CVE-T)

$8 billion in debt, and at this oil price, the numbers don’t work. Profitability doesn’t work. This year is $8 billion of debt and next year $9 billion and next year is $10 billion and profitability is not there. Oil has to go to $60, which is the problem. This is too volatile for him.

oil/gas
Bill Harris, CFA

Portfolio Manager, Avenue Investment Management

Price: $10.950
Owned: No

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2017-06-14

COMMENT
Gibson Energy (GEI-T)

These are smart guys who are shuffling the pieces around, and you have to be patient. While they are shuffling the pieces, the stock goes sideways. 50% of the hard assets are where they have the tanks, the kind of really dumb metal business that is still needed, and it is all still active. He likes their bonds and that is what he would own, where the risk/reward is really interesting.

pipelines
Bill Harris, CFA

Portfolio Manager, Avenue Investment Management

Price: $17.760
Owned: No

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2017-06-14

BUY on WEAKNESS
Inter Pipeline (IPL-T)

Historically, this has been one of the best re-investors of capital in the space. He is always drawn to it because of the rate of return. It is long-term contracts. If you are looking for the safest, long term, underlying cash flow of any pipeline company, historically this company has had that. They did the big Marathon acquisition last year, and he is not 100% sure of how that blends in. There is a little more risk to it, but from the debt point of view, having those bonds out, it is still underpinned by the best cash flow in the industry. He likes this in the low $20, and that is where he would add. Dividend yield of 6.25%.

oil pipelines
Bill Harris, CFA

Portfolio Manager, Avenue Investment Management

Price: $25.730
Owned: Yes

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2017-06-14

COMMENT
Kelt Exploration (KEL-T)

A really dynamic group. You will get a return when they discover a lot of resource. It is going to be harder to see with their strategy, but one day you will wake up and the company will have found a huge amount of resource, and it will just get sold to somebody. This is one that you just have to sit on and let them do their thing.

oil/gas
Bill Harris, CFA

Portfolio Manager, Avenue Investment Management

Price: $6.050
Owned: No

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2017-06-14

PAST TOP PICK
Osisko Gold Royalties Ltd. (OR-T)

(A Top Pick May 10/16. Up 4%.) A year ago, this company had a core value of $700-$800 million with $70 million potential cash flow. They have tons of cash.

Bill Harris, CFA

Portfolio Manager, Avenue Investment Management

Price: $16.100
Owned: Yes

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2017-06-14

TOP PICK
Roxgold Inc (ROXG-T)

It is operating its mines. It has really come off. Thinks that this is really a great, long term entry point for it. They might also change their strategy and build this into a company, and that is what he is waiting on. (Analysts’ price target is $2.)

precious metals
Bill Harris, CFA

Portfolio Manager, Avenue Investment Management

Price: $1.130
Owned: Yes

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2017-06-14

COMMENT
Raging River Exploration (RRX-T)

This has been a great company. What is really astounding is their profit margins. They did extremely well in the Viking. It is always curtailed by size, and now they’ve made a big jump into another area. The market is in a “wait and see” mode to see if they can execute the way they have historically. It has gone sideways for 4 years and they are now in the process of reinventing themselves and will probably come firing from a profitability point of view.

Oil and Gas (Integrated Oils)
Bill Harris, CFA

Portfolio Manager, Avenue Investment Management

Price: $8.280
Owned: No

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2017-06-14

WATCH
Teck Resources Ltd. (B) (TECK.B-T)

We have only a handful of big Canadian companies that are really important. At this level, this is where you want to buy, but first wait for it to break out technically.

precious metals
Bill Harris, CFA

Portfolio Manager, Avenue Investment Management

Price: $22.420
Owned: No

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2017-06-14

COMMENT
Tourmaline Oil Corp (TOU-T)

It seems like they need a strategy change. The traditional strategy was “if you build it, they will come”. You actually have to believe that maybe there isn’t a buyer and after building a great big production company you maybe have to live within the numbers. This has to be run for profitability, not for the resource. The strategy change is probably more important than driving the stock price. We have too much gas as well as pipeline constraints in the Canadian Western Basin.

oil/gas
Bill Harris, CFA

Portfolio Manager, Avenue Investment Management

Price: $26.720
Owned: Unknown

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