Husky Energy: Why I Bought More

Dec.27.09 | About: Husky Energy (HUSKF)

No, I didn't eat too much fruitcake and apple pie this holiday season, I just bought myself a gift on Christmas Eve in the form of 52 more shares of Canadian oil and gas firm Husky Energy (OTCPK:HUSKF) at $29.63/share. I've been looking to boost my portfolio exposure to oil and gas and after looking at a few options I came back to Husky for reasons not limited to the following:

  • After Husky shares had fallen from a high of around $52 in 2008 and the company cut their dividend, they haven't bounced back as much as I expected given the rebound in oil prices. I now don't see a lot of downside for the shares as the price of oil feels firm now that the economy is out of the hole it was in.
  • The stock has also underperformed many other oil and gas stocks and the valuation seems reasonable at just $4 above its multi-year low.
  • I think Husky will be quick to raise their dividend back up once their earnings catch up to the price of oil. Husky is now paying $1.20/share in dividends, while their EPS in strong-oil years past has been in the $4-$5.50 range. I think we have some high-oil price years ahead of us...
  • The current yield of 4% offers some in pocket return with little risk of downside to the share price as the great recession moves further into history

Husky now makes up 7.4% of our non-registered portfolio.

Disclosure: long Husky