BNN - Thursday, May 23, 2024 - 12:00 p.m. (ET) - Segment #2

>>> Eric nuttall taking your questions on energy stocks. It's spring time in paris and the kings and queens of clay have come out to play Tennis played on another planet That is a piece of art right there Ooo lala! Roland garros on tsn and tsn+ We all strive for peace of mind, whether in life or our investments. But that's not easy with today's market complexity. For over two decades, Goodreid has helped Canadians from coast to coast to achieve their financial goals, through both good times and bad. Working with our portfolio managers, you can navigate tomorrow's financial uncertainty with confidence. It's time. Take control of your wealth. I'm Gordon Reid. Invest with confidence, invest with peace of mind. To learn more,visit Goodreid.com. -Last quarter Capital Direct investors saw a return of over eight percent. -Find out why so many people have been trusting Capital Direct for over sixteen years. -Speak to your financial advisor today and ask for a copy of our offering memorandum. CapitalDirect.ca Harvest Equal Weight Global Utilities Enhanced Income etf. The world's top utility companies in one etf, global Utilities and steady monthly income. Harvest ETFs, income happens here. Closed captioning of this bnn Bloomberg program is brought to you by Goodreid Investment Counsel. Invest with confidence. >> Andrew: eric nuttall is taking your questions on energy stocks. What else. >>> John sylvan in alberta -- or john in alberta, go ahead, please. >> Caller: hi, eric. How are you? >> Hi, john. I am well, thanks. >> Caller: you are the man in the oil patch. >> Thank you. >> Caller: can you give me your view on tourmaline oil with lng possibly coming on? Natural gas prices increasing. Can you give me a target price on that, please? Thank you. >> You bet. Tourmaline I would regard as the highest -- one of the highest quality names that you can buy to get access to a bullish natural gas outlook for 2025. You are getting feel like I've said this many, many times but you are getting all the attributes that you want. Rock star ceo very good management team. Huge inside ownership. Decades and decades worth of drilling inventory. A very good gas marketing team. So they have done a great job of accessing hubs before competitors get premium pricing. Do you get exposure amongst them and other natural gas guys to a bullish outlook on natural gas as the storage glut gets erased due to what is now hot weather thank god plus producers curtailing volumes and the inevitable increase in lng capacity. So for us tourmaline it's a barbell approach. We have about a 5% weighting in tourmaline. We have been adding to smaller cap natural gas names when liquidity allows because it is a challenge. We just bought more of one -- another one this morning. So for tourmaline we have got it again this is $4 nymex. Five times cash flow and about a 9.2% free cash flow yield. In terms of cash returns we have had about a 5.5 to 6% -- I am sorry. 7% yield next year specials plus the base. U.S. companies traded material premiums to canadian names. You can look at a range 6s to 7s. So we think tourmaline given the pedestrian grieve management, inside ownership quality assets 7 is pretty reasonable. A $93 target price which is 36% up side from now. So it's not the doubles. In terms of the fund manager you can't just have an entire fund with those types of names because the volatility will make most clients seasick at times. So you've got to add ballust. Tourmaline is ballust within a portfolio. >> Andrew: thanks for the question.

>>> Daniel is in markham, ontario. >> Caller: hi, andy. Hi, eric. >> Hi. >> Caller: can I have your thoughts on energy allocation strategies? What's your decision-making process benchmarks and targets equal weight cash on the side to fully invest it as well as fully invested to [indiscernible] essentially the eric nuttall philosophy. One of the best and favourite guest on "market call." come more often. >> Thank you very much. >>> So personally and I am a little odd in this. I like to buy when others do not. I have panic. I 6th fear. When you want to be greedy when others are fearful and I find those best buys are when you are sick to your some angle. That's not the case today but a lot of before we talked about this earlier a lot of the florian oil oh, my god ukraine is bombing russia and what will happen with israel and all these different things, iran. That is not a time to deploying capital because when there is huge risk premium in the oil price you've got to worry about waking up one day to a headline oil is down $5 names have fallen 10 to 15%. We look at where global inventories are today there is no risk premium in the oil price. We are bullish on oil. That makes me want to deploy capital. We have gone from 33% cash weight to about 10.5 right now. We are actively spending that money. Question is what do you want to buy. You can buy oil names. Right now if you look at the spread between large caps and small that valuation gap is the widest in history. Meaning the large guys are trading at such a massive premium and the small guys are such a discount. So why is that? There are 2 energy funds left in the country. Another one of my competitors winding down is my understanding. They are a good team they have done very well. It's an inefficient market. There is not as much interest in the small cams. That makes me want to buy large caps you think. We typically want to be contrarian. We see nunavut small mid-cap stocks so long as you have asset quality, asset tenure and a management team that you can trust. Where that free cash flow will allow for very meaningful share buy-backs. So when I think about like a tamarack we talked about earlier 20% free cash flow yield. Another one I will talk about later on a 30% free cash flow yield. There is always a bit of hair to the story and so your job as a fund manager as an investor is is to determine is this a mispriced stock or is this a value trap. A value trap is a cheap stock that stays cheap forever. A mispriced stock is an opportunity where there is a catalyst to drive that re-rating. My job is either to identify catalyst or to create that catalyst to drive that re-rating and my belief it's meaningful share buy-backs. Actions speak louder than words. We are actively deploying cash we raised pretty significantly about a month, month and-a-half ago. >> Andrew: trying to think. So stocks are out of favour I guess people are worried beauty is skin deep but ugly goes all the way down. [laughter] right. It's hard to find ones that are fairly discounted.

>>> Anne is in coquitlam, bc. Go ahead, anne, please. >> Caller: hello. Good morning. First time caller. I have been listening to your program for quite a few years, four years. My question is about the deer energy. I bought it it was a penny stock I bought it at 50 cents. It has done something but not as good. I am just wondering should I sell it and buy something like eric recommended last time called precision drilling. >> Or you can always buy an energy fund. Leave it up to you. The concern with gear is once they -- so they right sized the dividend. They came out with a strategy a year after year and-a-half ago where they were very griffs on the dividend payout and I think a lot of people confused how defendable should a dividend be. People think well, jeez, just increase the dividend. Increase investor interest. Two components. You have a bails dividend which should never be cut ever. So most quality companies will base that on a very, very low defendable oil price. So like a cenovus. They will say like $45 oil. It's rock solid down to that level. Others wanted to try to attract investor interest and were too aggressive. And what they have been forced to do is cut that I have had dividend. Gear cut their dividend butterfly by 50% several months ago. That alienates you from a large part of investors. Think of suncor. They cut their dividend during covid. Negative oil prices. Some people still hate them for it. Once you cut it extremely alienating from people want to go deploy. Plus I mentioned this is not a market where there is a tremendous amount of small cap interest. Value trap, cheap stock. 2.2 times cash flow $80. It's 19% free cash flow yield. What's the catalyst to re-rate it? I can't come up with one. So it's not a name that we own today. >> Andrew: not calling to you. Okay. >>> We will take a quick break and when we come back and then we will have a look at eric's past picks. That's coming up. [ ] (Mid-tempo music) Welcome to Own Your Sharewith RealShare. I'm Glenn Baxter with CompanyCEO Shaily Srivastava and President Adi Koparde. RealShare is a new onlineinvestment platform specializing in real estate. Can anybody join? Most individuals 18and up are eligible. RealShare is registered inOntario, British Columbia, Alberta and Manitoba and weare soon expanding into other provinces. And how do investorsget started? It's easy. Go to RealShare.ca, createan account and access your qualified deals. RealShare is a platform thatprovides investors with research, investments and alsomaintain and manage their portfolio. Once you've created youraccount, what's the next step? Simply select the suitable deal,click on invest now and complete the documentation. If there are any furtherquestions, our team of experts will reach out to you. What about making returnson your investment? Great question. Return is the most importantpart of investing. So when you invest withRealShare, everything is handled within the platform. So whether it is your returnof capital or it is your distribution, it comes to yourinvestor account and you can decide to withdraw or reinvestas per your preferences. Shaily , Adi,thank you so much. For more information,go to RealShare.ca. Announcer: Hone your sharewith RealShare. Private real estate investingcan be exclusive. But what you had a way in? RealShare provides online accessto a wide range of high quality private realestate opportunities. Expand your portfolio, diversifyfrom the volatile stock market. Whether you're looking forpassive income, a tax strategy or the option to invest in realestate development, private REITs or mortgage funds,RealShare is the answer. It's easy, fast, freeto join and secure. To find out how to own yourshare, go to RealShare.ca. >> Andrew: eric was on our show may 31st of last year. Cenovus energy. Let's see how this one has done. One thing I've heard about cenovus is people have been a bit impatient about the debt running. Hasn't been fast enough. >> Yeah, it took longer than what we would have hoped for and what everybody would have hoped for. So they had some issues with the refineries which impacted cash flow. They have been working capital drag with tmx which reduced their habit to hit their net debt target as quickly as they hoped for. But thankfully that's in the past. We have them hitting their debt target in the next a couple of months. July, august, give or take. 59 which point they will pivot to a hundred per cent of free

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