CANADIAN OILPATCH / MAISON PLACEMENTS
BUY & SELL - CANADA OFFERS BEST PROSPECTS
Saturday, November 23, 1996
With the Toronto Stock Exchange 300 composite index in record territory, Rolie Bradley, institutional salesman at Toronto's Maison Placements Canada Inc., is combing the market for stocks that have not yet had a run but offer potential.
He is targeting stocks geared to the Canadian domestic economy, which should finally receive a boost from lower interest rates and tax cuts in Ontario. "So far the lower rates have not produced much of an increase in consumer spending," Bradley said.
The strength of Canadian stocks reflects the presence of ingredients equity markets tend to like: low interest rates, with the prospect of further cuts; a strong U.S. bond market, and strong earnings in key sectors.
The U.S. equity market has also been going through the roof with massive amounts of money moving into equity mutual funds. Some leading Wall Street commentators who were quite bearish earlier this year, have now turned bullish. The cloud on the horizon, said Bradley, is the possibility the U.S. economy is slowing, as some signs indicate.
There is a rising savings rate and a slowdown in retail sales and the rate of growth of instalment credit. This could adversely affect company earnings. The U.S. market could start to recognize this in 1997.
The Canadian energy sector has performed well this year and the challenge, said Bradley, is to find stocks that are still relatively cheap.
His top energy pick is: Petro-Canada (PCA/TSE) $19.95 ($20.10-$14.88). The Calgary-based integrated energy company is the "cheapest of its peers." It is a substantial natural gas producer and the outlook for natural gas prices is positive. This prospect has boosted the share price of natural gas producers, but Petro-Canada "has lagged behind the rest of the pack."
Bradley estimates cash flow per share at $3.30 for 1996 and $3.60 for 1997. This means the stock is trading at 5.4 times estimated 1997 cash flow, which is a lower multiple than that of Imperial Oil Ltd. and Shell Canada Ltd. |
