Four remaining buy-recommended energy stocks that carry our Contrarian Buy label may soon join peers in stock price uptrends judging by recent market conditions. U.S. Producer EOG Resources, Inc. (EOG) along with Canadian Producers Encana Corporation (ECA), Imperial Oil Limited (IMO) and Canadian Oil Sands Limited (COSWF.PK) are fundamentally attractive stocks, we believe, despite being in stock price downtrends defined by comparison to the 200-day average. Investors with a longer time horizon can benefit from the selling pressure created by investors who may have a shorter time horizon. Time is the friend of the long term investor, we might say.
Shale oil and shale gas innovator EOG has accumulated rich future potential, but has made the sensible business decision to slow its drilling in the face of overheated cost to complete wells and low price for natural gas. Pure-play unconventional natural gas producer ECA rests in stock price after its value-creating spinoff of buy-recommended Cenovus (CVE) a year ago. After growing for a hundred years, IMO, Canada’s only AAA-rated industrial corporation, has many years of further oil volume growth ahead. IMO’s oil volumes are growing in mineable oil sands through its 25% of joint venture Syncrude and in deep oils sands at its Cold Lake and Kearl projects. Largest Syncrude partner with 37%, COSWF suffered in stock price when it announced a lower dividend in 2011 concurrent with its change to a corporation from a trust. The strongly negative effect a dividend reduction can imply for traders can be a special opportunity for investors looking at total return potential measured by McDep Ratio.
Originally published on December 14, 2010.
