Energy Trend Setters: Canadian Income and Small Cap Stocks

by: Kurt Wulff

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 (NYSE:PWE), Enerplus Resources Fund (NYSE:ERF) and Pengrowth Energy Trust (NYSE: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 (NYSE:XEC) and Encore (NASDAQ:EAC) are appreciating by that standard along with Top Line Income Payer buy recommendation Dorchester Minerals (NASDAQ:DMLP).

The most out-of-favor stocks and classic McDep Ratio opportunities are four U.S. royalty trusts, buy-recommended Hugoton (NYSE:HGT), hold-rated San Juan (NYSE:SJT), Bottom Line Cash Payer Mesa Royalty Trust (NYSE:MTR) and Top Line Cash Payer Permian Basin Royalty Trust (NYSE: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.