PAST TOP PICK
(A Top Pick Feb 04/21, Up 27%) Best in class in the world from track record in M&A, pricing power, marketing, and growth profile. Resilient demand and pricing power in face of interest rate hikes and situation in Ukraine. Deserves its premium. He's buying on pullbacks.
WEAK BUY
Prefers to own the concessions, not the builders. But if you're set on owning E&C, he likes the growth profile and position in the US and globally. Would benefit from increased activity in the US. Also likes WSP, with its strong growth and good margin profile relative to competitors.
HOLD
Long or short-term hold? Dividend yield is sustainable, and it will increase by 3.8% once the KKR deal is done. Very strong balance sheet. Valuation is no longer compelling. O&G stocks go through boom and bust, so a long-term hold will see lots of volatility. Good for income, but better areas to invest in if you want compounded returns over 5 years.
BUY
Management has put governance issues behind it and instituted good policies. Good mid-single-digit growth, healthy dividend yield, favourable jurisdiction of Ontario. Good RRSP candidate. Not too much of a headache for volatility and downside. For him, better opportunities elsewhere.
COMMENT
Utilities space. The pecking order of his preferences is renewable IPPs, energy infrastructure, and then regulated utilities. He likes names like BLX and NPI. See his Top Picks.
SELL
Likes it, but stock has run. Sold on valuation, in favour of better opportunities. Tremendous growth profile underpinned by power generation and nat gas business. Excellent management. Growth profile of renewable IPPs is better and more sustainable, as it won't go through a bust any time soon and growth is visible.
COMMENT
Potential for another bidder? Doesn't think so. It's at a healthy valuation. There are other companies you can play in the bio-fuel and renewable diesel space, such as DAR for a large cap or LCFS as a niche Canadian name.
BUY
A niche Canadian name. Building a renewable diesel facility and other ESG-friendly projects. Super-compelling valuation for a company that will double or triple EBITDA over the next couple of years. Growth opportunities outside its renewable diesel facility.
BUY ON WEAKNESS
Half is renewable, half is regulated utility. Sees further upside. Not adding at current levels, but would on a pullback. Acquires companies that are under-earning, right-sizes them to generate more cashflow. One caveat is that they'll always be in the market for equity, so there will always be a bit of an overhang. If you don't want that, ALA is a great name. It has a utility and a mid-stream business, and its valuation is still quite compelling at current levels.
BUY
A great name. It has a utility and a mid-stream business, and its valuation is still quite compelling at current levels.
BUY
This one, run by his firm, trades as an ETF on the NEO exchange. You could also look at the ZGI, though SCGI has outperformed it.
WEAK BUY
You could look at this one, though SCGI has outperformed it. SCGI, run by his firm, trades as an ETF on the NEO exchange.
COMMENT
Canadian infrastructure ETF? SCGI, run by his firm, trades as an ETF on the NEO exchange. You could also look at the ZGI, though SCGI has outperformed it.
PARTIAL SELL
Dividend safe? Company has dialled back dividend growth recently, so payout ratio doesn't get too high. Yield is very healthy. Fairly safe for an RRSP. Short-term risk of open-ended mainline contracting. Latest rally leaves little room for disappointment. Perhaps sell half and diversify to TRP.
COMMENT
Impact of traditional energy getting into renewables? It is having an impact. It's the right decision. They're allocating a lot of capital to areas that will have a lot of growth and it's a key area of focus for investors. But he'd rather own companies that are 100% focused on those areas, rather than 10% as ENB and TRP are. Names like PIF, NPI, and BLX are pure plays in the renewable energy space. There's a lot of opportunity out there, especially with valuations of renewables that have sold off.