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He likes this company. It gives a good Canadian source dividend, and a company that is more than Canada on an energy standpoint. They’ve diversified into the US, so it's not just a Canadian pipeline. There are some catalysts in the next little while. The stock has been stuck around $60. Typically, you buy at $60 and sell at $65 so it looks interesting. Has a good 4% dividend yield that should grow. Probably $65-$70 is the next range for this stock.
This has been a mainstay in his energy growth portfolio. It has been a pretty good performer this year. The industry views this as a natural gas stock, but they have some very nice oil pools, more specifically liquid natural gas. This is why you have seen the stock start to pick up in the last week or so. Great management. If you are looking for a growth energy stock, which comes with the volatility, this would be a name. (See Top Picks.)
What is holding them back right now is the take away capacity, and a lot of maintenance on some of these collecting natural gas lines out west, which has affected production and volumes, and more specifically, a lot of that gas has been shut-in in storage, so you have a glut of gas which caused the AECO price to go to zero 2 weeks ago, but is now back to $1+. Also, one of its major shareholders sold down his holdings. He is waiting for clarity on AECO price, which we might get in the next couple of weeks.
If I sell Canadian Banks, where should I put my profits for income and a little growth? This may crystallize some capital gains which you have to look at as a factor. He likes Canadian banks for the long-term. They have a good control on less volatile earnings than we have seen from other banks globally. However, valuation is a little stretched and he prefers European banks that trade around BV. NAFTA could be a headwind in the next while, and that could hurt general Canadian markets and there could be a selloff. In addition, there are new housing rules coming in January. Keyera (KEY-T), Pembina (PPL-Y), Inter-Pipe (IPL-T) have sold off and give you a mixture of good yield and some growth. You can also find some growth and income in some of the REITs.
A concern he has is the potential of a dividend cut in November. Most analysts are encouraging them to cut the dividend to help right side the ship. There is a lot of value in a company like this if they can turn it around. They started to turn the company around about 6 months ago, and doesn't think you are going to see much until Q4 of 2018. He would recommend buying half around the dividend cut. Being a tax loss candidate at the end of the year, Buy your 2nd half in late December, post tax loss selling, or early next year as you get more clarity. It sets up for a nice trade. Dividend yield of about 4.8%.
Zero rates are about to nudge higher and Quantitative Easing by buying bonds is starting to taper and unwind. The European Central Bank announced that instead of buying $60 billion of their bonds, they are now buying $30 billion each month, and that is going to zero by September of next year. Therefore, the thesis of gold going up in the next 18 months is going to look a lot different. The scenario of not trusting your own currency has a lot of bigger problems, and in that environment, this would be a higher risk stock. Don't be afraid of peeling off profits.
To him, the preferreds would be considered a high yield debt, so for that portion of your portfolio, you are probably OK. He would be hard pressed to envision this company filing for bankruptcy in the next couple of years, when the Government, especially the Québec government, always seems to have their back. Probably a safer way than playing the stock.
(A Top Pick Feb 8/17. Up 20%.) Still his favourite Pharma name. Had a small one-cell lung cancer solution, and the market is starting to get its head around that they are still in the game. We should get results in the 1st half of 2018. Over the next 5-6 years, their pipeline of drugs is so vast and undervalued, that as drugs come through fruition into cash flow and get approval, there are more and more tailwinds. It could be a potential take out candidate.
(A Top Pick Feb 8/17. Up 27%.) A safer way of playing energy. Has been collecting a 4% yield. Volumes are picking up. The lands they are collecting royalties on, and with $50 oil, they’re starting to drill more, so royalty cheques are getting bigger. It was a safer way to play the rebound in energy. Still thinks it is undervalued and is a good holding.
This could be a Buy based on his view of undervalued European banks. You would probably see a couple of good years going forward in the European stock market. However there is still a bit of hair on this. It's cheap, trading at about .4X BV. There are other banks or service companies you could buy that doesn't have as much hair. He would go with names like Credit Suisse that trades at about .8X BV or UniCredit, an Italian bank trading at .75X BV.
Innergex (INE-T) is buying this company and is giving stock as well as cash. If it's a tax deferred takeover, he would be fine with the takeover. It does some Hydro, renewable and power, a lot of it in Québec and some in Europe. On the cash portion, if you wanted to stay in power, you could buy something like Capital Power (CPX-T), which gives you a good dividend. However, the portion that comes to you in stock should be tax deferred.
A play on chips, Apple devices and hopefully they get into more autonomous vehicles. In the last 3 days, it has dropped about 25%-30%. Morgan Stanley reduced their rating on the company, but Morningstar increased their rating. He thinks you are okay continuing to Hold and see what the next couple of quarters brings.
Market. We pretty well have a globalized synchronized growth period now. Brazil and Russia have turned around because of oil prices. Greece, which has always been the problem child until about 2 years ago, will probably put the strongest GDP growth rate in the Eurozone in 2018. China and India are the main drivers of global growth, but with all the other developed nations doing their part. We are seeing that in strong earnings, consumer confidence, unemployment stats and the stock market. He’s been allocating a little of his North American exposure into Europe. The US has been a great place, but thinks they are in the 8th inning. Tax reform is coming, which can give a little more of a melt-up to the stock market. There are still some nice tailwinds on earnings growth coming from the US, but he doesn’t see a multiple expansion happening. In Europe he sees earnings growth, similar to the US, probably 8%, but there will probably be an extra turn in the multiple, and a possible 15% next year in Europe and only 8% or so in the US. The next NAFTA meeting is around November 17, so be prepared to get some noisy headlines. The bigger card in Trump's poker game on world trade, is China. That could be a 2018-2019 story, and he can't deal with China if he is lackadaisical and bends over with NAFTA and the south Korea trade partnership. Don't be surprised if we get a more negative outcome on NAFTA in what the market is anticipating.