Rob Stabile

Economy. Germany is a concern. Italy and France are showing negative GDP numbers and now Germany is heading to be stalled out. It was supposed to be a beacon of strength along with the UK. US$ has been strong largely because it is the economy that has shown the most growth. This is a country that put together the most fiscal and monetary easing policies that has actually started to work, whereas some of the other countries are not getting the same response. You are seeing a flight to safety with the US$. With the easing policies everywhere else, the signs of inflation are really not there, so people are continuing to plow into US treasuries and keeping yields low. Given that the US continues to be strong and the job growth is there, corporate America is in the best shape that it has been in a long time. The next leg he would like to see is the consumer benefiting and starting to spend. Job growth has been there. He would like to see some wage growth next. Canada should benefit to some extent as the US economy does better. Our weakening dollar is a tailwind as well.

Energy. West Texas oil below $90 is a bit of concern. There is either a problem with demand or too much supply globally or a mixture of both. WTI is going to trade in relation to Brent or international pricing. It is worth keeping an eye on, because he thinks that a lot of the countries that have increased their production, especially the ones with geopolitical problems, are not sustainable. Over time they are going to run into hiccups.

Missed out on the way up, but has acquired some on the recent pullback. Owning dealerships is a very good and profitable business, especially when you can operate multiple dealerships. Multiple is a bit high at 10X their EBITDA, but he sees the consolidation as still in the early stages. He is selectively buying this on pullbacks below $60. Auto dealership business has proven to be very defensive even during recessionary times.

Long-term hold and is the dividend safe? Doesn’t own this because it is large and when they do have growth projects, it is harder to move the needle relative to some of the smaller companies. They do have some pretty good visible long-term growth and it is looking quite attractive here. He would suggest that you nibble away and leave yourself some room in case it does get cheaper.

Typically the smaller companies in Canada have been pretty quick to respond to a drop in energy prices. Most of them will have some kind of hedging in place to weather a short-term dip in the energy price. This company has quite a few long-term contracts and are well diversified. All their rigs are utilized in the US now, and the returns remain pretty robust for energy companies.

The entire group has sold off largely because oil prices have dropped from over $100 to below $90. This company made several acquisitions in order to beef up the size of the company and pay a nice dividend. The knock on it would be that they have made so many acquisitions they don’t necessarily have one contiguous core asset to be built around. (See Top Picks.)

This is just a “pass through” for the oil price. They own a percentage of the oil sands project. Operationally it has not been the best, running at a 65% efficiency rate where 80%-85% would be ideal. With oil prices above $100, there was enough breathing room for them. If there is a prolonged oil price drop, he expects to see market starting to fret and the dividend may be at risk. Large company with a pretty solid balance sheet so there isn’t a big risk. He prefers others.

This is viewed as one of the best in class operators when it comes to the junior/intermediate oil and gas space. Management team is highly regarded. Growth is getting harder to come by because they have been so successful. If you are bullish on oil and you want to stay exposed there, this is one that you can hold on to.

Solid management and a very good allocator of capital. Expects there will be dividend increases over time. The beauty with oil sands projects and oil sands operators is that once they spend capital to get a project going, there is very little decline and very little maintenance capital to be spent. You will see this company building more projects and expanding, but there will be a significant amount of cash flow being returned to shareholders in the form of dividends.

(A Top Pick Jan 17/14. Down 56.73%.) They had a “customer concentration” with Samsung, and as Samsung rolled out their new device, which hadn’t been very successful, they chose not to use this company’s technology. Had felt this company’s technology will become much more prevalent with the emergence of Internet things. They have some good core technologies so there is a chance they could recover.

(A Top Pick Jan 17/14. Up 8.89%.) This has some of the best oil sands properties in Canada based on quality of reservoir,. They are still in the early stages of their growth profile. Feels the market is undervaluing the long-term strategic asset that they have. They have been able to access capital through equity markets and debt.

(A Top Pick Jan 17/14. Up 5.9%.) Still likes the company. This was a bit of a unique situation because it is a lumber producer, timberlands and they also own a large US homebuilder. They were divesting that homebuilder and he thought it would give a bit of a lift to the stock. Still likes it.

Getting to a certain scale where it is harder to move the needle with their growth, but they definitely have growth potential. Operates within Alberta, which is why he likes the smaller companies as they don’t tend to cross the borders.

Spartan Energy (SPE-T) or Cequence Energy (CQE-T)? This one would be his choice. Management team has been successful in a couple of previous iterations. The current pullback is because of the oil price. Because this company is run by a high quality management team and it has high quality assets, you can have a bit more confidence versus the average intermediate or junior E&P company that it will rebound on an oil price correction. (See Top Picks.)

Spartan Energy (SPE-T) or Cequence Energy (CQE-T)? Spartan would be his choice. (See Top Picks.)