General Market Comment. The announcement by the Federal government to begin First Nations consultations over the Trans Mountain pipeline is hopeful that there can be a solution, but it will take more than two years, he feels. Unfortunately, Canada is suffering from handing three million barrels per day to the US at half the price of world market. Meanwhile, Eastern Canada imports 1 million barrels per day at world market prices. Hopefully, Trans Mountain can eventually be built and exports can eventually go to Asia. This is peak pessimism in the market. China and European market are facing headwinds currently, which is causing a more defensive holding position by money managers. This leads him to feel we are in the seven inning of the bull cycle – expecting another 10-12% growth in markets per year over the next couple of years.
Is natural gas a better buy than oil? He thinks growing LNG demand, reduced coal demand will aid the market for the next 20 years. With LNG on the west coast, our market will open to Asian markets. He thinks Shell will expand an LNG plant into phase II and Chevron will likely enter as well. His favourite names are ARC, Tourmaline, and Kelt on the E&P side and Trican on the service side.
This is a tough business to be in as construction and design are low margin businesses. The last couple of quarters showed some operational hiccups. He needs to see these issues turn around before investing. He thinks there are other ways to play the infrastructure wave, such as Brookfield or SNC Lavalin.
There has been some management turnaround resulting in the selling of assets and a reduction in the dividend. The Quebec economy is doing well. He likes that it is trading below NAV, but it will take some time to get back to full value. He would suggest diversifying with some other REITs. Yield 6.2%.
They teamed up with members of the Tragically Hip band into the cannabis space. He thinks this space is over-valued and would a speculative holding at these levels. Larger cap names are more likely partners with non-cannabis companies. You should own these in a basket or a fund. He would prefer Canopy, who has a partner with Constellation Brands.
They had already had a run up ahead of the announcement for west coast LNG. He thinks this company has the most immediate upside potential due to its link to camps and catering. They will be building modular homes, buildings and other structures and have a good land holding to develop a great growth strategy near Kitimat. Yield 2.6%. (Analysts’ price target is $3.56)