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Energy. Previously OPEC had reduced the supply so that there was no inventory and that stoked the price up. However, there was always lots of oil around, lots of excess capacity. Now with Saudi Arabia saying that it was going to produce everything that it can, by definition that means there is no capacity, but it is all inventory which makes the market more volatile. The commodity can sit at $45, but the stock market will start discounting where the commodity can be 6 months from now. In connection with the Fort Mac situation, the first one that gets hit is the insurance company. $9-$10 billion of something has to get sold to pay for it. That money is being stored in assets, and assets have to be liquidated to cover bills. The one thing he is more concerned about is how much it would affect the smaller businesses, as opposed to the big Suncor (SU-T) and Canadian Natural Resources (CNQ-T).

Unknown
COMMENT

We are still not out of the oil environment, and all things could happen. When the commodity is low he likes to buy something, and as clean a company as possible. This one has a great team and great producing assets in Western Canada. They’ve done a great job and brought down costs. If oil stays down longer and lower, it kind of gets in trouble on obscure things that normally wouldn’t matter. This has a bunch of old producing assets and they are going to reinvigorate the plays. Has a massive amount of environmental abandonment liability, which might never be an issue, but it is out there, so he goes for companies that are a little bigger.

oil / gas
COMMENT

The LNG landscape has changed so much in the last 6 months, and it is what you can sell your product for on the international market, so you start putting yellow flags beside some names. This company is in limbo in that category of investment, so he prefers Altagas (ALA-T), which cancelled their LNG project. Veresen is on Jordan Cove, and he can’t figure out if this is a good or bad idea economically. Also, have many environmental issues as to how to get the gas there. Too many question marks about their business plan.

pipelines
COMMENT

Aecon (ARE-T) or Stantec (STN-T)? A great Canadian stable company. He uses it as a dampening mechanism in his portfolios. There is a lot of infrastructure to be done. A great, consistent business. Every time he has made an assessment of these 2, he has gone with this one. The stock is now at the higher level of his valuation, so he owns the bonds.

contractors
COMMENT

Aecon (ARE-T) or Stantec (STN-T)? Every time he has made an assessment of these 2, he has gone with Aecon.

consulting
COMMENT

Forestry? His go to name in this sector is always this one. When he looked at it this winter, it wasn’t cheap enough. It’s all right on Fair Market Value and will make lots of money over the next couple of years when the US housing market recovers.

west coast forestry
COMMENT

Had probably been the single best company in Canada 15 years ago in terms of monopoly franchise and what they did. Then they bought other diversified businesses which collapsed and had to restructure. It has now been cleaned up and is on his list of companies that he would probably like at the right price. However, a lot of the move will probably be geared to the construction market in the US, which might or might not happen. This is being fixed, but you still have this propane monopoly. The 16% dividend really looks secure.

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