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Weak Canadian dollar may provide catalyst for three big energy names

  • The weak Canadian dollar will provide extra cash flow to the country's energy sector but this is not being recognized by investors, particularly those outside Canada, Canaccord's Martin Roberge says in recommending Canadian Natural Resources (CNQ), MEG Energy (MEGEF) and Suncor (SU) as Canadian names benefiting most by heavy oil differentials.
  • "A weaker C$ should also help spreads to narrow but more importantly allow Canadian producers to enjoy huge currency translation gains," Roberge says.
  • The shale growth allure of U.S. E&Ps has blinded investors, but with the loonie breaking down below key resistance levels, the strategist sees a catalyst for going long the three Canadian names and shorting ConocoPhillips (COP), Anadarko (APC) and EOG.
Comments (10)
  • Mike Serebrennik
    , contributor
    Comments (630) | Send Message
     
    It is being recognized by me:) Long $SU and $COSWF
    14 Jan, 07:27 PM Reply Like
  • saratogahawk
    , contributor
    Comments (1704) | Send Message
     
    Long ERF, PGH, PWE and PBA in Canada. We should see improving earnings for many in this group.
    14 Jan, 07:44 PM Reply Like
  • Greyfox070
    , contributor
    Comments (43) | Send Message
     
    Agreed. I believe ths U.S. will continue its decades-long decline and I firmly believe Canada is THE place to invest. Long SU, CNI, PBA, and PGH.
    14 Jan, 09:50 PM Reply Like
  • Veritas1010
    , contributor
    Comments (1410) | Send Message
     
    Any projections on an SU bottom with the Loonie suffering and oil glut fears short-term?
    14 Jan, 08:19 PM Reply Like
  • kevinconway
    , contributor
    Comments (1924) | Send Message
     
    Substantial gains in the energy sector will help boost $C back to parity and possibly over in next 12 months or so. could have a 7-8 % gain.
    14 Jan, 09:28 PM Reply Like
  • Powell McHaney
    , contributor
    Comments (22) | Send Message
     
    One who short EOG, lose shorts.
    14 Jan, 09:46 PM Reply Like
  • tgar13
    , contributor
    Comments (194) | Send Message
     
    I see being long these Canadian names but think shorting American E&P is not so smart
    14 Jan, 10:47 PM Reply Like
  • silverscreen
    , contributor
    Comments (186) | Send Message
     
    Agreed, unless one is sophisticated enough for some complex arbitrage. Not a game for 99% of retail investors.
    15 Jan, 08:51 AM Reply Like
  • Uncle Pie
    , contributor
    Comments (2863) | Send Message
     
    These observations are amazing. The CAD has dropped 10%, but the companies will make 10% more of them. So what?

     

    People think "one dollar" is a fixed unit of measurement, like a meter or a liter. Obviously, it's not.
    15 Jan, 08:18 AM Reply Like
  • kevinconway
    , contributor
    Comments (1924) | Send Message
     
    This from my financial advisor team:
    So where do we go to make money in stocks in 2014? Believe it or not, Canadian energy and materials stocks are starting to look very attractive to us. A large part of this stems from the large discount these companies are trading at compared to their American counterparts. For example, when you take the growth rates of those industries into account, Canadian energy stocks are 30% cheaper than comparable companies in the U.S. while Canadian materials stocks trade at roughly an 80% discount to their U.S. counterparts. These discounts are becoming too large to ignore, and the combination of stronger economic activity and a lower Canadian Dollar should be beneficial for earnings growth in these Canadian industries. On the energy side, Empirical Research Partners has pointed out that the relative valuation of integrated oil companies compared to all other large cap companies has not been this low in 60 years. We believe investors should be looking at Baytex (BTE-TSX), Cenovus (CVE-TSX) and Suncor (SU-TSX) among oil producers.
    We continue to like the energy services space, where companies are trading at the low end of their historic multiple ranges and hence provide more value than other sectors. Calfrac Well Services (CFW-TSX) continues to be our preferred name. In addition, we continue to like energy infrastructure companies and would continue to buy Shawcor (SCL-TSX) below $40.
    15 Jan, 10:56 AM Reply Like
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