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Strategies & Market Trends : Dino's Bar & Grill -- Ignore unavailable to you. Want to Upgrade?

To: Goose94 who wrote (132313)	9/1/2022 3:42:37 PM
From: Goose94	Read Replies (1) \| Respond to of 202700

Whitecap Resources (WCP-T) top pick from Jason Mann on BNN.ca Market Call thirsty Thursday Sept 1st @ 1200ET Clearly over the last few years or so you could have picked just about any energy stock and returns would have been remarkable. After a five-year bear market (and negative $40 oil during the pandemic), it’s clear that the world is now short on energy in all forms, and oil has become a key driver of inflation. We don’t think that the structural reasons why this has been true will be solved anytime soon. In many ways, government and social demands for more environmentally friendly energy production have made the problem worse in the short run – there has been underinvestment, and a lack of policy to encourage new traditional production. Essentially, we’re forcing transition before we have the supply from green energy, and so this may persist for some time. Energy companies are currently some of the cheapest, with the best earnings growth. They are the new growth stocks, although obviously cyclical. That said, we’d argue that “this time is different” in the sense that their cyclicality in the past was in part tied to levered balance sheets. The opposite is true today, with many energy companies debt free or on their way to being debt free. Whitecap is a western Canada producer, predominantly light oil. Like many energy companies, it screens as very cheap, 1.6x EV/EBITDA, 5.9x cash flow, decent yield at 4.4 per cent and a very low payout ratio. Despite energy weakness in June and July, it is rebounding again and price momentum is still stronger than in other sectors. WCP has lagged recently which is why we are highlighting it now. It is buying XTO Energy Canada for $1.7 billion - a big deal for them – adding 32k BoE production and 20+ years of inventory for the future. It has been in the penalty box a bit by investors who would have preferred it to keep the balance sheet under-levered and buy back stock and pay dividends rather than growth by acquisition strategy. We think the stock can play catch up though as they deliver the cash flow and de-lever, and it’s trading at a meaningful discount to its Montney peers.