Canadian Natural Resources (CNQ-T) top pick from Jason Mann on BNN.ca Market Call Friday Nov 26th @ 1200ET
Despite recent returns, energy stocks remain cheap – and in fact are actually *cheaper* than they have been in years due to the very strong cash flow that has reduced debt and been used to buy back shares or do accretive acquisitions.
While the high price of natural gas and crude oil are the drivers, if we are in a “transitory for longer” environment, prices may well stay high for some time to come.
Perversely, ESG policies, which have starved the industry of capital, and pushed governments to delay or stop new traditional energy development and pipelines, are also causing higher prices. CNQ has a large, diversified asset base in natural gas, crude oil, oil sands, and overseas.
Has both strong price momentum, in the top 10 per cent of TSX stocks, but also scores well on value. Trades at 6x EV/EBITDA, 13x PE, 8x Free cash flow. No balance sheet issues, and a healthy yield at 4.5 per cent. They been using cashflow to reduce debt, pay dividends, and return capital to shareholders. Recently announced purchase of Storm Resources – immediately accretive, and didn’t need to pay much a premium for the assets, assuming they are able to close the transaction.
A stable way to participate in what we think are fairly early innings for the energy bull market. |
