Canadian Income and Small Cap stocks are trend setters with all seven in our coverage in an upward stock price trend defined by price above the 200-day average. Low McDep Ratios give fundamental support. Buy- recommended Canadian Oil Sands Trust (OTCQX:COSWF) has the appeal of long-life oil outside the U.S. and its income potential rises with oil price. Shorter-life, oil-oriented Canadian Income Trusts, namely hold-rated Penn West Energy Trust (PWE), Enerplus Resources Fund (ERF) and Pengrowth Energy Trust (PGH), have joined the stock price uptrend by crossing above their 200-day average.
Adding to McDep Ratio coverage in April and classified in our newly designated Top Line Cash Payer group, Freehold Royalty Trust (OTCPK:FRHLF) has been in a stock price uptrend for weeks. Looking past the next few months of excess natural gas supply, investors in the past few days have taken $US stock price into an uptrend above the 200-day average for Canadian Small Cap Birchcliff (OTCPK:BIREF) and Canadian Income Trust Peyto (OTCPK:PEYUF).
Investors are seeing 200-day stock price uptrend in five of twelve U.S. stocks. Small Cap Independent Producer buy recommendations Cimarex (XEC) and Encore (EAC) are appreciating by that standard along with Top Line Income Payer buy recommendation Dorchester Minerals (DMLP).
The most out-of-favor stocks and classic McDep Ratio opportunities are four U.S. royalty trusts, buy-recommended Hugoton (HGT), hold-rated San Juan (SJT), Bottom Line Cash Payer Mesa Royalty Trust (MTR) and Top Line Cash Payer Permian Basin Royalty Trust (PBT). The fundamental characteristics are not much different than those of trend setters, while the return potential appears high. A built-in two to three month lag in income payments may contribute to a lag in stock price uptrend. Patient investors are likely to be rewarded, we believe.
Originally published on July 24, 2009.