Genus Capital Bullish on Potash, Aecon Group and Husky Energy

Wayne Wachell, CEO and chief investment officer at Genus Capital Management in Vancouver believes there is no substitute for quality when it comes to stock picking and manages the Genus Canadian equity fund with a focus on value stocks with good growth prospects and proven fundamentals.

One of his top names at the moment is Aecon Group Inc. (AEGXF.PK), which despite the slowdown across the Canadian construction sector, remains broadly diversified, with operations in multiple regional and end-markets.

He said:

While the stock is discounting a significant slowdown in its oilfield construction operations, it retains a strong balance sheet and healthy backlog in all three of its industrial, buildings and infrastructure segments. In addition, the acquisition of Lockerbie & Hole, coupled with an anticipated upside from its buildings and power divisions, are expected to bolster operations and drive growth for the company next year.

Mr. Wachell also likes Potash Corp. of Saskatchewan Inc. (POT) whose share price currently reflects lower growth expectations, due to a more conservative outlook in potash pricing and lower EPS guidance from management.

We continue to favour Potash because of its strong financial position. It is the world’s lowest-cost fertilizer producer, and has over 75% of the world’s excess capacity. This creates a tight long-term market with high barriers to entry. That said, short-term potash demand has continued to be impacted by a restricted credit environment; however that weakness is already reflected in the share price and street earnings per share estimates have been lowered.

Another choice is Husky Energy Inc. (HUSKF.PK), who announced on Monday a year-over-year drop in first quarter earnings of 63% but also beat estimates in the process.

He said:

Despite the merger of Suncor (SU) and Petro-Canada (PCZ) raising multiples on oil sands assets, Husky Energy retains a favourable valuation compared to its energy peers.

Mr. Wachell added that he remains bearish on Teck Resources Ltd. who bought Fording Coal at the peak of the commodity cycle, incurring significant debt.

He said:

Since the deal, the price of coal has declined significantly; the company’s cash flow may not be sufficient to meet its debt obligations. Teck is now selling assets in a tough environment. Our biggest concern is the debt overhang.

Comments

[Amouna:]

George Soros is bullish on POT as well. He sees very good value in this stock. The same view is shared by Jim Rogers, who implicitly favors Commodities and stocks related to agriculture.

I am considering joining the bandwagon for POT. Less sure about Husky Energy. I might go with Suncor...

Apr 28 02:43 PM

[SJD:]

MOS has the lower P/S, P/B, PE, and PEG of the 3.

Apr 29 11:12 AM

[Freya:]

But, its all in the eye of the beholder. POT, MOS, TRA, TNH all and sundry, buy them all, go with DBA or DAG or whatever is Ag oriented. Go with whatever you are comfortable with.

Last year with IPI above $70, analysts listing on MSN had an Average expected 2009 earnings above $10. I do not expect that this year but eventually a big Yes. Thats about another 200% over the Next few years.

Its Buy and Hold for me.

May 02 09:52 PM

[Freya:]

I go with percentage gains/losses. I believe I can get a higher percentage gain on IPI VS MOS.

May 01 08:57 AM

[Freya:]

Amouna, pure Potash play, Intrepid Potash, IPI.

do your DD.

Apr 28 06:20 PM

[Freya:]

Who are we to believe Trace Mayer or you?

Strong sell Vs. strong buy

Apr 28 12:38 PM