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Likely to post solid future growth longer-term. Currently, we have spiking bond yields, which impacts telco valuations. This one is at a level that is not cheap, trading at 17.5X 2018. However on Q3 they guided to lower CapX for the 1st time since 2010. That's a suggestion they have built most of their footprint. Also, they beat on new subscribers both wireless and wireline. He models them growing EPS at 15% for 2017-2019. With this pullback, because of the climb in bond yields, you can write a Put and oblige yourself to own it at $45, and get a nice little premium.
The effective payout ratio is 142% for 2017, which is something not sustainable. However, their balance sheet isn't bad, trading at 2.2X 2019 debt to cash flow. Valuation has improved quite a bit. It’s a high, high quality company that has just been caught in the middle of the storm with ECO prices having dropped the way they have. He models 10% production growth over the next few years. They have great assets and are very capital efficient. In a taxable account, it’s something you could be nibbling on. Dividend yield of 4.3%.
He predicted the end of a 17-year downtrend about a year ago, and thinks that continues. A very messy stock. It is still risky, and he doesn't see any earnings until 2019. He’s becoming increasingly confident in their revenue story, and sees 16% compounded annual revenue growth over the next couple of years. Sees their balance sheet continuing to improve. He can see 17X 2019 for the first time in a long time. You could be nibbling at this in a taxable account.
A story of higher interest rates. They’ve been thriving in an environment of rising institutional allocations, going to real assets in lieu of bond yields. You have to ask yourself how low are interest rates likely to be for the next 5-10 years. If you believe we are in a lower for longer interest rate environment over the next 3-5 years, it is not a bad time to be picking away at this. He is modelling 13% pre-cash flow growth per share 2017-2019. Feels you could buy this on its current dip.
All the energy infrastructure and pipelines have pulled off a little, with higher interest rates. There is commercial support now for Keystone, which gives another $2-$6 to the stock. Even without that, he sees this probably going to $72 over the next 12 months. The company indicated they are going to grow their dividend 8%-10% out to 2021. 60% payout ratio. He models 8% earnings per share growth. On these higher interest rate concerns, you can be buying at this time, or better yet, Sell a Put and oblige yourself to own it at $55 and get paid a nice little premium. Dividend yield of 4.3%.
He sees the dividend as being sustainable. They can grow their Free Cash Flow per Share 9%, for 2017-2019. The company recently gave guidance they’ll continue to grow their dividend 10% per year, out to 2020. The concern here is the regulatory approval for the Line 3 replacement risk. He thinks that it goes forward. Feels this is a buying opportunity. Dividend yield of 7.8%.
If you want to buy the story, first of all you have to ask yourself if you want to own gold. Gold is looking very bullish. Lower rates used to be the driver of gold, but now you have higher rates and gold is acting well. There’s been all the crypto competition coming in now, and yet the metal is acting really, really well. What is really going on is that the US$ has been weak for the last year. If you believe in gold, this company sets up pretty nicely. They plan to advance organic growth in their portfolio, instead of M&A. The stock is pretty cheap, trading around 1X its NAV. He models 20% cash flow per share growth over the next couple of years.
In spite of lower energy prices, he is still modelling 4% Cash Flow per Share Growth and 8% Production Growth 2017-2019. This company has an awesome balance sheet. However, it is a little expensive, trading at 8.2% 2019 estimates, versus 7.1% the integrated peer average. If you like oil, this is a name you can buy on a pullback.
US$? The US$ goes inversely with commodity prices. Half of the S&P 500 earnings come from offshore, so where the dollar goes, is very, very important. These things tend to usually go in cycles. The Trump administration favours a slightly lower greenback, so he thinks that is the direction that it ultimately goes, relative to the euro.
Going to build a $3 billion plastics plant in Alberta, using gas as a feedstock. The market is probably concerned that this is a step away from their low risk profile, and is going to take a while, so he is not modeling any growth for the next few years. This is a dividend play in a lot of ways, so he models the payout ratio as going from 66% to 72% to 77% over the next 3 years. He sees the balance sheet slightly deteriorating from 4.7% to 5.2%. It is trading at a reasonable valuation versus its midstream peers. Just hiked their dividend by 4%. There are better plays out there, such as Pembina (PPL-T). Dividend yield of 6.7%.
Market. The money flows in equity markets are suggesting the markets have to give something back. Every sort of metric would suggest markets are getting overbought and long in the tooth. However, he is not concerned, because there aren't too many good alternatives right now. With US treasuries trading at 2.6%, and still so many good stocks trading at 10 or 11 times with really good growth, people are trying to give up on this too soon. The retail investor is not back in a big way. If you look at the greed that finally came into Bitcoin, that is probably the 1st real greed we have seen since the financial crisis. There is still enough appetite to speculate.