BNN - Thursday, May 23, 2024 - 01:00 p.m. (ET) - Segment #7

>>> 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. [ ] The world of investments is growing, offering more alternatives than ever. ( ) Choose an alternative that invests, in what's here to stay. ( ) Things you can see and touch. ( ) Things that are part of our everyday lives. ( ) Avenue Living brings a different approach. ( ) One that's steeped in history, experience, and trust. ( ) Choose a proven alternative. Talk to your advisor about Avenue Living today. ( ) ( ) ( ) The infiniti qx60 exemplifies modern luxury. With powerful suv performance, three rows of comfort, and a sleek-yet-daring design. ( ) Lease a 2024 qx60 from 0.99% apr for up to 24 months. Visit INFINITI.ca. ( ) New Herbal Essences is packedwith naturally derivedplant based ingredientsyo and none of the stuffit won't. Our sulfate free collections,smell incredible and leave your hairtouchably soft and smooth. New Herbal Essences. We know you care. But if this is all too real for you and your loved ones. Make the call. Because we care too. Home Instead. To us, it's personal. My life is full of questions... How do I clean an aioli stain? Use Tide. Do I need to pretreat guacamole? -Not with Tide. -Why do we even buy napkins? Thankfully, Tide's the answer to almost all of them. -Do crabs have eyebrows? -Except that one. For all of life's laundry questions, it's got to be Tide. In today's environment. Canadians want more from their investments. Invico Diversified Income Fund has provided investors with portfolio diversification and downside protection for over a decade. What could you gain by investing in one of Canada's leading alternative income funds? Invico, reach for the future. >> 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

cash flow. Employing the eric nuttall buy-back model, we think. We don't see a meaningful increase in the dividend because they want to have it a at a very defendable oil price. We think buy-backs especially given the valuation. At $80, $4 gas trading at 4.6 times we have them trading. Enterprise to cash flow that's a discount to their canadian peers. Certainly a discount to U.S. peers as well. >>> We think this sector will trade the large guys will eventually trade to an 8% free cash flow yield. It's less than a biggest struggle over the past a couple of months is what's the ultimate valuation target that we should be using because price to cash flow enterprise to cash flow is very nebulous. In a sector where model is going to be low to no growth, maximize free cash flow give it back buy-back eventually dividend yield we think 8% is pretty reasonable. 10 to 12 for small guys. 8% free cash flow yield on cenovus that's a $43 share price. 58% up side. We feel confident now that the steps necessary to have taken to fix their down stream reliability issues have been taken. Management team is laser focused on hitting their final debt target and we await that press release once they announce the inflection of a hundred per cent. We have seen companies like suncor they had investor call on tuesday this week. They increased the pails of which they will be able to return more of that free cash flow back. The stock react what had we think cenovus and some other names have become a catalyst in the next a couple of months. For us this is our favourite large cap about 9.5% weight. >> Andrew: in the fund. >> Yes. >> Andrew: headwater exploration hwx. This one modestly. Has it had problems or setbacks in. >> It's had a large sell-off in the past month or so from 8.50 down to 7.22 now. When oil started rallying going a month and-a-half ago what we saw was every bank, every broker in canada was calling us trying to see if we wanted to sell some stock to them. I think there is a bit of chase where generalist investors and momentum investors who they may know the ticker symbol they don't even know what they do were chasing the stock and pushed it in the short-term beyond levels which it should have gotten to. It has sold off. We have been buying from those sellers and we have added for 5 million shares in the past week, week and-a-half. It's sitting at 5 1/2%% weight for us. We look at it. People are forgetting that everybody's chasing athabasca and cnq for the heavy oil exposure. They are a heavy oil producer. For all the tmx benefits and differentials down below $12 their key benefactor, benefiter from that. We are paying 3.7 times cash flow. 11% free cash flow yield yield in addition to production growth 5.6% yield. A chairman, ceo, ceo who we think are very, very good at finding oil and they have been proving themselves not just in the clearwater trend but outside of the clearwater trend using more modern multi-lateral technology. We think 6 multiple given it is a small cap there is not a lot of people on the plan that's want to own these things. We do. We think 6 multiple about $11 share price a 1% up side and you get a 5.5% dividend yield which will grow over time. Drull your final idea was whitecap resources. -- >> Andrew: . This one lagging the energy group, too. Because I am calculating since the end of may of last year total return from the energy index which of course includes pipelines and stuff about 33%. >> Yeah, so this is underperformed the index certainly underperformed our fund as well. We have sold it in our main fund. We continue to hold it in our income fund because we view the dividend as very defendable. We are able to get a lot of healthy option premiums by selling covered calls on a monthly basis which is part of our strategy in the nine point energy income fund. We are concerned that the market just that is proc solid view that they want to always go and buy things. And what we have seen from -- >> Andrew: sorry, been very aggressive have they? >> Yeah. And so what that creates is overhangs. People are just sick and tired of having stereo deal with overhangs I think. The baytexs, tamarack valley. Overhangs we have had to deal with. >> Andrew: they issue a bunch of stock. >> Eventually that stock comes to the market. No doubt especially if you are doing it at a bottom of cycle, you are buying -- you are taking advantage of timing. Crescent point, baron has done a great job of this. The market is sick of having these positions where they bought something now we have to wait six, nine months foreign the share price to actually do something. That's plaguing the up side potential in this name. So we look at it. .6 times cash flow. 13.5% free cash flow yield. A lot of that is being used for the dividend because it's yielding 7%. We think 5 multiple about $15 share price is reasonable. But for capital appreciation we think there are other names that will likely outperform until

management does something to change the perception that they always want to go out and buy something. >> Andrew: another thing we should always ask a ceo who has done a take-over of a stock or a lot of stock well, what about the overhang you are creating here? >> It. Do it's something that you just inevitably have to deal with. >> Andrew: yeah. Because it ends up saving r stay in institutional hands the new stock they will be maybe holding too much of the company then. >> Every situation is different. It depends where like I think about baytex bought an asset very good quality asset proven that now paid a very good price for it but it's private equity. A lot of private equity guys if you are a private equity fund you need to return that capital back to your share -- your unit holders within usually a knife to seven-year term and then you look at well the fund has a year left in its life you know they will be a seller. You have to be aware of each situation. >> Andrew: we will be back with eric nuttall taking your questions on energy stocks. 1-855-326-6266. Get all the benefits of a bond and more in an exchange traded fund. Introducing the td Target Maturity Bond ETFs a new suite of fixed income investment solutions that are designed to act like individual bonds, providing income and final payout on specific maturity dates with the added benefit of liquidity, diversification and professional management from a leading asset manager in Canada. Td Target Maturity Bond ETFs. We know you care. But if this is all too real for you and your loved ones. Make the call. Because we care too. Home Instead. To us, it's personal. Captain, the Cable Emperor has established contact. Put him through. May the lag be with you. Both: May the lag be with you. What's the status? Their ship has escaped, Your Eminence. They're just too fast. I see. Well don't worry, good things come to those who... (Static) Who what? "...who wait," captain. He's frozen again. Of course he is. Classic Cable Empire. ( ) Time is money. Let Super SaveHydrovacs save you both.When you book a Super you get a state of the artpowerful hydrovac unit that will save you time on thejob. Super Save Hyrdrovac is the newest fleet of powerfulhydrovac trucks on the Lower Mainland. These unitswill make short work of your tricky excavation, catchbasin cleanout and so much more. Make the right call. CallSuper Save Hydrovac today and get the Blue Guysworking for you. Super Save Group is a CORCertified Safety Conscious company. Check them out atSuperSave.ca Mulvihills Canadian Bank Enhanced Yield etf gives investors premium exposure to Canada's big six banks with monthly distributions and a 9.3% yield. Cbnk is the highest yielding Canadian Bank etf. Mulvihill. For Junior Hockey supremacy, here we go the stage for the chl's ultimate prize is set. One of the hardest trophies to win in all of hockey as champions have emerged. In the ohl the whl and the qmjhl to take on the host team. Saginaw spirit Saginaw is ready for the one hundred and forth time .. Mission accomplished! The memorial cup, presented by dow only.on tsn Welcome to the world of spycraft. (Dramatic music) Keep yours eyes glued to the action. Let's get down. Let's get funky! What are you concealing? You a communist sympathizer? (Whistles) It's just a job. (Funky hip hop music) >> Andrew: email from john s birchcliff a buy? >> We don't own birchcliff. We have been buying all smaller natural gas names to barbell our arc and tourmaline and we own other name called chesapeake. Birchcliff they cut their dividend there. Was a huge short interest and it's good that they did because when you look at the payout

Copyright protected and owned by broadcaster. Your licence is limited to private, internal, non-commercial use. All reproduction, broadcast, transmission or other use of this work is strictly prohibited.

Transcripts