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Stock Opinions by Philippe Capelle

N/A

TSX Venture. This still has room to run. It is up about 25% over the last year since February 2015, and earnings estimates keep rising. The last estimate is for $1,058 for 2015. The strong US economy is helping the Canadian economy turn around. The weak Cdn$ is helping on the export side. Resource sector is getting paid in US$ meaning the top line is growing as the Cdn$ is weakening. Financial sector is pretty solid as well. He would recommend looking for sustainable and growing dividends within companies.

Unknown
BUY

This is a perennial long-term investment story. They have a corner on one of the best uranium assets globally with low-cost production. Prices have been moving back to the upside of about $32. For the long-term he absolutely likes the story.

integrated mines
COMMENT

Looking for increasing free cash flow generation with their good production growth. Also, thinks the dividend will increase over time. This is a great story to own. An integrated, so they have upstream production as well as the downstream integrated. In the event of volatile oil prices, they make money on the downstream.

integrated oils
COMMENT

Have done a great job at streamlining their assets. The PrairieSky IPO was a huge success and they still own a good chunk of it. Have a lot of cash that they are investing. Eventually you want to see good growth on their free cash flow and a good dividend. Not his favourite story within the gas sector.

oil / gas
COMMENT

Hudbay Mining (HBM-T) or Lundin (LUN-T)? He likes zinc. Some of the major mines will be shutting down over the next couple of years so the price has been moving very well on base metals for the last few months. Both companies have exposure, but Lundin has more nickel exposure so he would lean more towards this company for the zinc exposure. This company is also bringing on mines in Peru, and will double or triple production of copper, zinc and gold over the next couple of years. Great management.

precious metals
COMMENT

Hudbay Mining (HBM-T) or Lundin (LUN-T)? He likes zinc. Some of the major mines will be shutting down over the next couple of years so the price has been moving very well on base metals for the last few months. Both companies have exposure but this company has more nickel exposure so he would lean more towards Hudbay for zinc exposure. Hudbay is also bringing on mines in Peru, and they will double or triple production of copper, zinc and gold over the next couple of years.

metal mines
COMMENT

Production growth is very good over the next few years. Have a number of issues ramping up with new mines in Brazil, but that should already be priced into the stock. Malartic is a great acquisition for both this company and Agnico Eagle. There will be more value over the next couple of months as they explain how they are going to grow production. This will be a big cash flow generator for them. Not his favourite right now as they are having problems hitting production guidance. The Brazil issue is still an overhang. Also, have assets in Argentina which is still a political issue.

precious metals
COMMENT

They have been running on a treadmill. They need to sell assets to fund their CapX program and pay their dividend. They have some good assets and some tough assets and a lot of liabilities. High commodity prices will ensure the dividend. Not a favourite name. Still a lot of risk.

oil / gas
COMMENT

Thinks this stock was punished because of operational issues. There are higher costs at Foster Creek. Thinks this is going to recover. Likes the growth profile as well as the integration with the downstream.

oil / gas
PAST TOP PICK

(A Top Pick Sept 12/13. Up 16.12%.) Had been delivering on the retail side extremely well. Second-quarter had stellar results and margins are improving rapidly. The 1.3 billion EBITDA target they have on retail should be raised in the next few months. Some downside on their wholesale due to operational issues. Still a very good story. Price of corn is an issue and farmers’ income is down this year. There is some uncertainty as to where they are going. Once they go through this final leg of CapX over the next 12 months, free cash flow should increase quite a bit and you should see a good dividend increase.

chemicals
TOP PICK

(A Top Pick Sept 12/13. Up 28.49%.) This is absolutely a “go to” play. There is plenty of room to grow. They’ve won a number of contracts. Pricing and utilization have been moving up. Notwithstanding the volatility in the price of gas and oil, they have been getting market share in the US and in key plays. Taking market share from US competition and smaller players. Yield of 1.78%.

oil / gas field services
PAST TOP PICK

(A Top Pick Sept 12/13. Up 7.8%.) The price of silver is down $4 since a year ago, so this company has pretty well outperformed the price of silver. They will still have about 20% growth over the next 2 years as they own the silver stream and the gold stream for the mine in Peru. Risk/reward should be to the upside. Dividend of around 1.5%-2%.

metal mines
BUY

Very well-run company. They will want to keep growing by buying more assets. Pretty high dividend of around 6%, which is enough to hold investors’ interest. A great story to own. Not cheap, but these stocks are never cheap.

oil / gas
BUY

They do a lot of deals and this is probably a good entry point because they probably won’t do another deal for 6 months. The dividend is safe.

oil / gas
COMMENT

Roughly half of their production is base metals, zinc and copper, which are doing well. The other half is the met coal, which has been a difficult environment. There has been a lot of supply in coal so prices have been very weak. If you are willing to believe that producers will show some discipline and start cutting production, there should be recovery on the pricing side. Their coal quality is good. Have ventured into the oil sands, which he is not terribly comfortable with. He only owns a small stake.

Mining
N/A

Gold. There are 2 catalysts for gold. Either a crisis or inflation. As we saw, the Russian and Middle East situations did not move gold very much. Inflation was going up at the beginning of the year, but is now going away. Right now we are range bound other than the seasonal rally somewhat linked to the Indian wedding season. Wouldn’t be surprised if gold tested lower over the next couple of months, maybe the $1200 level. Lower prices may force gold companies to be more efficient and cut costs a bit further. (See Top Picks.)

Unknown
DON'T BUY

They will be able to turn around, but the question is how long does it take. Have made a lot of changes in upper management. Have also disposed of a number of mines, but thinks there are more sales to go. Also, have a very high level of debt. (See Top Picks.)

precious metals
HOLD

They just brought on line an oilfield in Asia, which is increasing production. Now they have another oil sands project that they will bring on line later this year, probably with some CapX increase. Once this is in full production, there will be good increasing cash flows. If you are willing to look 12-18 months out, he believes they will increase the dividend. A good story.

oil / gas
BUY

A really great, great profile and pretty cheap on price to cash flow if you are willing to look 1-2 years out. A premier play in Canada with massive production. Also, benefits from a tightening differential between the Canadian oil price and West Texas. Likes this one a lot. A great stock to own.

oil / gas
BUY

Have lumpy revenues from the manufacturing side so the issue is that expectations were too high going into each of the quarter’s results and perhaps the company did not communicate well enough. Guidance for the balance of the year on EBITDA earnings for the year Q3 and Q4 seem quite achievable. Also, this lodging stock will benefit greatly from the development of the LNG platforms in Western Canada. Dividend is safe. A good story.

Transportation
BUY

Announced a great partnership with Slumberger last year, but the issue is that it takes a lot of time to get it ramped up. At the same time, they may have had less focus on North America than other players who have been gaining more market share. The story is fine and they have great assets. Eventually the ball will get rolling and he wouldn’t be worried. A great entry point. Trading below 5X earnings value to EBITDA for next year, which is almost the lowest in the group.

oil / gas field services
HOLD

There are a couple of stories here. They have great cash flow growth going for the next couple of years as their CapX is ramping down a bit. They have low cost mines. The other side of the story is the price of potash, which collapsed 20%-30%. This has stabilized since the beginning of the year. Demand is very good this year. Potash pricing could increase over the next couple years if demand stays firm, but he doesn’t think the price range is very big. Not his favourite story. You are safe with the 4% dividend.

integrated mines
COMMENT

Biggest gold producer globally and has a great growth profile. Bringing on Elinore in Quebec over the next couple of quarters. Also, bringing on their mine in Argentina. With new assets there is always the degree of risk on expectations. He would be very comfortable owning this name. (See Top Picks.)

precious metals
TOP PICK

One of the premier pressure pumpers in North America. Balanced in the US and Canada. Also, have assets in Argentina and a little bit in Russia. Right now you are seeing better utilization rates. There is some pricing power as well. Bringing on new capacity over the next 12 months. Earnings potential is tremendous. He sees 20%-40% growth in earnings going into next year. Dividend yield of 2.51%.

oil / gas field services
TOP PICK

Probably the lowest cost producer in the big cap space that he covers. Basically no debt at this time, because they were not getting permits. They are getting close to getting some of those permits, but have the liberty of holding back if gold prices are too low. They should be obtaining permits in China over the next 6-12 months for their Eastern Dragon mine, which should eventually lead to listing the Chinese assets to Hong Kong or selling part of the assets. A great catalyst beyond the gold price. Yield of 0.23%.

precious metals
N/A

Markets. Sees good upside for the markets going into 2015. Canada and emerging markets will improve 12 months out. Pure energy is 20% of the TSX and will do the heavy lifting.

Unknown
BUY

It is a typical long term hold story. Uranium story was damaged by reactor in Japan, but now things are moving on.

integrated mines
WAIT

There is a massive oversupply in the commodity. Doesn’t see the price of potash recovering over the next three years. The dividend is safe, however. You could wait 3 to 5 months out to buy.

integrated mines
BUY

Great story, management, growth profile. Could recover quite a way from here.

Golds
BUY

The pullback today is a good entry point if you think gold will continue to recover. The transaction is accretive. The company is delivering.

precious metals
HOLD

Has been acting very well. The IPO that is coming up for some of their assets is being anticipated by the market. The Nat Gas market has been a rocket ship in some ways. It could take a couple of years to recover from the current low inventories. Does not think you should trade out this stock right now. These stocks will not pull back this summer.

oil / gas
BUY

Likes it at this level. Couple of projects coming on line this summer. As you bring on projects and de-risk projects, the stock value increases. Is in a sweet spot in terms of catalyst.

oil / gas
DON'T BUY

Met Coal and base metals, mainly copper. You need supply to come off line or demand to come up in Met Coal. Copper inventories remain low and supply is not coming on so he is more comfortable with it. It is no man’s land for this stock.

Mining
BUY

Does not think it is a takeover target. It has a low mine life. But he likes the company and have been delivering. Surprised it has not been re-rated here, but does not feel it will be a takeover target.

precious metals
PAST TOP PICK

(Top Pick Sep 12/13, Up 27.49%) Have been delivering on all markets. More upside to come. Increased margin over the last few quarters. Extremely comfortable with this name.

oil / gas field services
PAST TOP PICK

(Top Pick Sep 12/13, Up 14.64%) Expanding potash mine in Saskatchewan. Retail business is going well although planting season is late this year. He is still comfortable with this one. Corn prices have rallied back and this stock moves with them. His gut feeling is that dividends won’t increase this year.

chemicals
PAST TOP PICK

(Top Pick Sep 12/13, Up 2.45%) If you think silver is increasing then this stock will also.

metal mines
DON'T BUY

They have to work out some issues. Not a go-to name for him. Could rally if gold price went up, but not their first name he would buy.

precious metals
HOLD

Light oil producer, so correlated with the oil price. Have been very acquisitive and tended to issue a lot of stock. However, it is a good story and they are under good execution. Thinks it will catch up so hang on to it.

oil / gas
HOLD

A Royalty company, a great business model. They are opportunity rich right now in this environment. They have executed very well and have a good management team.

precious metals
BUY

Positive. Momentum is strong. These names are going to go higher although not as fast as over the last couple of months. There is a chance they could increase the dividend in the future.

oil / gas
BUY

They are working through recent issues. They have great assets and are normally great executors. Thinks this is a stock you can buy and sleep well at night with. Less torquy than other integrated oil names. You have to make sure issues are not with a fundamental asset.

oil / gas
DON'T BUY

The catalyst is permits in a number of countries. This is a low cost producer with cash on the balance sheet. It has a higher political risk profile than others so you might not want to get involved right now.

precious metals
STRONG BUY

Great on execution. Made a great acquisition. Market is working through the value of it. Exposed to the differential with the US and should benefit from the XL pipeline and refineries coming online in the US.

oil / gas
BUY

Negativity is about the 43101 release of a couple of days ago. It only gives the reserve oz and not the rest of the asset. Disregard the negativity. The new mine in Quebec will come online later this year.

precious metals
TOP PICK

Loves oil service industry. Pressure pumping sector has more upside from here. These guys specialize in it. They are at the international level. There will be increased utilization that should lead to pricing power in 2014/15. Don’t go by ‘Sell in May’ on this one. You might be okay waiting until the end of June.

oil / gas field services
TOP PICK

If you need to own a precious metal you need one that delivers. This one has a great growth profile. It is THE company of size that benefits from the Canadian dollar weakness.

precious metals
TOP PICK

There are a number of catalysts. 40% unhedged Natural Gas. One of the names that will benefit most from the differentials decreasing. XL would benefit them. High single digit growth profile can allow the dividend to continue to grow.

oil / gas
N/A

Be a half to a third in Canada. Favours energy over materials and fundamentals are better in oil over metals. LNG long term is attractive.

Unknown
BUY

A lot of uncertainty that will take a few months to resolve. Believes it will resolve and the asset is still there. Have to look at differential. This will come in eventually regardless of the XL pipeline. Oil will find its way to the US.

oil / gas
N/A

Markets. Syria is a small part of resources. Oil prices have more to do with fundamentals. Syria is a Cherry on top. Likes Europe’s pickup in PMIs. China oil demand over the summer is up 5% and they are replenishing their strategic reserves. There is underlying demand. Weakness in fertilizer based in waiting for debate in Russia to conclude. In India the wedding season is getting ready. For gold the seasonal trade has passed. Gold is an emotional commodity. Crude oil is pretty strong right now. You have to look at differentials. There were hopes earlier in the year of Nat Gas rolling over in the US. There was a small increase in production last year. There is a switch from coal to gas. The rigs are being more efficient so the rigs are not rolling over. It could lead to strength in price. They will make a lot of money on the liquids side.

Unknown
HOLD

Benefited from the strength and refining margins in Nat Gas. Faltering the last few quarters and things they are turned around right now. Would hold on to it.

oil / gas
WATCH

Look at net asset value. Strong growth over the next few years. Great management. Expensive stock. Use price and net asset value to determine value. There are other names he would buy at this level in the energy space. He would add at the $37 level.

oil / gas
HOLD

Price weakness comes back to the differential. BTX gets paid on the lower price. XL or rail gets the oil down there to capture the differential. Dividend is safe.

oil / gas
WATCH

Half base metals and half met coal. A China story. Steel and copper are more linked to China. Believes the macroeconomic environment is improving. Would add to them because of copper in a while.

Mining
BUY

Producers and can refine their own production. Suffer less from differential price. Great free cash flow story. Could see further increase in the dividend.

integrated oils
BUY on WEAKNESS

Would sell at this point. Dividend is safe but issue is earning consensus is still too high. Buy at $28. or possibly sell and get out.

integrated mines
HOLD

Is at an entry point. Gold stocks will move with gold margin. Executed well. Managing balance sheet well. Pushed out projects that are not accretive to business. Very little growth over next few years. They could rebound very well, so hold.

precious metals
N/A

Buy gold now? Economic environment does not favour gold right now. B2 gold, YRI-T, G-T are good names in the space.

Unknown
WEAK BUY

A large dividend is often a signal a dividend cut is coming. They are well hedged and so are well predicted. Prefers others as Nat gas names. Some level of dividend cut could be a good thing.

oil / gas
HOLD

80% of revenues from gold and business is royalties. But has done extremely well. Likes the story.

precious metals
HOLD

Hang on longer. Great profile over next 2.5 years, (30-35% production growth. Good management, lower political risk, likes the story.

precious metals
HOLD

He would wait for a recovery at this point. They have done the right thing in the last couple of years. Good production growth over the next couple of years. Comfortable with the name. Any acquisition will be accretive. Low political risk. Happy to hold on to it. They could cut the dividend depending on gold prices. Would be surprised if they raised it.

precious metals
HOLD

Reality is that most of the drop is linked to the drop in price of gold. Longer ramp up of mine than they expected, so the key is for them to pricing back the grades to what they expected. Higher risk when it is all one asset.

metal mines
BUY

Blue sky in their future. Fundamentals are probably going to improve. Demand will pick up as nuclear reactors are restarted over the next few years in Europe. Issues with starting up Cigar lake will push things out, but this is normal with Uranium mines.

integrated mines
TOP PICK

LNG Development is a fundamental change in the gas industry in Canada. As long as there are no political hurtles it will be important to Canada – drillers, pressure companies and lodging companies. A lot more space to go. 70% linked to oil but kicker is Nat. Gas. They are having a very good second half of the year. Some pricing power going into 2014. A cash flow growth story. 1.8% dividend and they could increase it over time.

oil / gas field services
TOP PICK

Likes the diversification. Only 10% exposed top potash. Exposed to phosphate and nitrogen as well. Growing retail position out west, increasing retail presence in US, Australia and out west. Higher Nat Gas price is not materializing. They will keep very good margins.

chemicals
TOP PICK

Royalty and streaming – silver. They pay a fixed price for silver and are not exposed to cost inflation. Great growth profile, growing cash flow and dividend. 50% of silver is industrial use.

metal mines
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