A sell off up north (resource stocks)

[selkirk]

since thursday the market in Toronto went in one direction. down. Capped off by Monday largest loss since November.

in the morning you knew it would be bad, gold was off, copper, zinc, nickel were off between 5-10%. and oil fell. I would like to look in this thread at some of the stocks and look at some of these stocks that people want to dump and also believe are part of a mania, bubble, ie. like tech.

not currently buying.


1. TLM Tailsaman Energy produced 521,700 Barrels/day in the 1Q 2006. avg production should be 515,000-535,000 per day for the rest of 2006. a 14% increase in production.

major areas of production North Sea, Western Canada, Asia. (Malaysia)

cash flow 2005 $12.33 2006 13.80- 14.02 2007 $15.75- $16.50

earnings per share 2005 $5.46 2006 $5 2007 6.00

stock is currently trading around 10X earnings.

going to split stock 3-1, and increase div 32% to .225 semi annual div

Great management, faces a US lawsuit from being in the Sudan, lawsuit should fail 99%, but you never know. US govt, and Cdn. govt argued for Sudan, gets complicated but if they lose the case you could file a lawsuit against any US cdn. company that ever dealt with 3rd world country.

capital spending increased from 4.4 billion to 4.8 billion, this is significant as many oil companies are actually spending less on, less targets.

2. TRP TransCanada pipelines
actually this stock went up as a defensive play, but has been weak all year.

yields 4%,
earnings per share 2005 $1.75 2006 $1.80 2007 $1.90-$2.10

this stock is in power business and pipelines, if it sell off on rising rates will buy some shares. hard to beat a 5% yield div, after tax.

3. PCA Petro Canada

is a very cheap integrated oil company and got cheaper, $46.99 at the end of Monday.
cheap.

earnings per share 2005 $4.45 2006 $4.20 2007 $5-$5.20

Cash flow 05 $7.68 06 $7.75 07 $9.20-9.40

yields .8% and share buyback
3.6 billion capital budget, which will see production growth 8-10% 07, and in 2008.

for the oil assuming $60US on avg. for 2006.



will add a few later.

thanks
selkirk

 

[selkirk]

well Toronto had another bad day, oil sold off, and we followed the US lead, and fear of inflation. rates will go up another 100 basis points. maybe more. guess the fed stoping was in the market....

note: not buying any, but will continue with the list these stocks seem to have a good value.

never try to catch a falling knife. let things settle out.

TECK Cominco (TEK.sv.b only trades on Toronto
$67cdn.
low 35.63 high 87.75

earnings per share 05 5.61 06 8.20-8.40 07 7- 7.30
div $2

company has $3.2 billion of cash and generates $1.4-1.6 billion this year. and 1.6 billion.

the div cost the company 406 million a year, so it is safe, hard to say that about most base metal divs.

the earnings take into account a 20% drop in the prices of Coppper, Zinc, Molybendium, ect. if they stay at current prices earnings will be 15-30% higher.

Merger News
Teck has made a bid for inco, Inco has rejected the bid and has bid for Falconbridge. Falconbridge wants to merge with inco.

Xstrata which owns 20% of Falconbridge, wants to buy the rest. they will bid against Inco.

Inco probably wins the bidding, falconbridge is at $56 cdn. but will probably reach $60 or slightly more before the funs stops.

do not believe teck will bid to much higher for inco.


own teck and have covered calls on the stock, will probably lose it in August unless it drops another $10. cdn. return 30% 9 months.

have Teck $48 May puts (hope they expire ) recieved $4.25
also have $48 Aug. teck puts (hope they expire toooo).

thanks
selkirk

 

[selkirk]

well the sell of continues, or probably will. Toronto is closed happy Victoria day everyone. a great long weekend.

still checked some stocks in the US and the base metals and energy continued the sell off.

oil at one point was off a dollar and all of these stocks were off 5-7% despite natural gas being up. which in the past would offset the losses and have little movement.

no one want these expensive 8-15PE stocks. oil and natural gas finished up but you would not know it by the prices.

NXY -2.2%
SU -1.6%
ECA 1.1% the one positive barely, and that was down over 5% at one stage.
CNQ -1.7%
TLM -2.9%

now time to look at NXY Nexen
assuming $60 oil

Cash flow per share 8.41 05 $9.80 06 14.40 07
earnings per share 4.34 05 5.40 06 7.70 07

Nexen is in the North Sea, Gulf of mexico, yemen, Nigeria, Western Canada, including an oil sands play.

231,000 Barrel/day 05
285,000 by 2007 and 370,000 by 2010


well run oil/gas company, would not buy now, just wait.

by the way heard an "expert" describe the mania in the oil and gas stocks and pointed to a few names that have come under presure, they all have healthy cashflow and trade 8-15PE. at $55 oil.

and recommended investors dump these bubble resource stocks and go into defensive names.... PE 15-30 (I checked)

should note: there are some resource plays I will be selling, probably sell the remaninder of HBM (Toronto) for a great profit.

may also buy back 2/3 put options I sold on Tek, and TLM, and maybe Ipsco. hate doing that but you want to keep your losses small on a sharp correction. and stick to your stops.....know matter how painful.

by the way long term I am bullish on the resource plays/sector. I have read about a dozen bearish articles for every bullish one......

This resource sell off the market is telling you that the US will not grow by 3-4% next year, instead growth will be at 2% or less, probably negative growth.

worldwide growth will slow sharply, China goes from 8-10% growth to below 3%. other emerging markets have little or no growth.

thanks
selkirk

 

[DOGS THAT BARK]

Kirk You have any particular buy price on NEXEN?
Was thinking if another drop today might pick some up--thinking of picking up more PTR if it drops below $100.
--any thoughts?

 

[selkirk]

DTB believe Nexen is not a bad value currently. should state I own a small position on NXY but have a larger position on $58cdn. puts, and TLM puts.

ie. NXY puts optons received $4, so my avg. cost will be $54cdn. if they are put to me, currently at $57.80.

upside if oil can stay over or at $60 is probably 10-15% maybe higher. all of these oils trade as part of a group.

often a company finds a good/great discovery, if the oil group is down then so is the company. maybe not as much but if you gave me the price of :

ECA, CNQ, SU, TLM, PCA, NXY. then could tell you what they all did.

so goes for base metals even when one metal is up if in general one is down they all are. or today they are all up.

if I was looking at cdn. sr. oil/gas stocks would look at Nexen, Tailsman (no oil sands ), Petro Canada (integrated).

Suncor is a good stock and I own some in DRIP/SPP plan (bought in 98 and will keep. however is highly valued.

Encana is a great play probably in a month or two. worried about the costs of production and currenty plenty of natural gas in the system. $6 natural gas is cheap, and should rise, long term supply is falling and demand is rising. see 8 natural gas maybe more if cold winter.
also the market is not valuing their oil sands play (which has not been developed) at anything. management is talking about spinning it out. then there is value. would wait

note : own ECA avg price $44cdn. have $56cdn. Jan calls (may lose it at that price, ten months.

there is probably value in other plays like PTR, and maybe Chevron, like the div. just do not follow them as close.

Note: will post when Penwest Income Trust trades on US exchange. yield 10%, payout ratio below 75%, and five million acres of land in western Canada. they will probably list on the US soon.

thanks
selkirk

 

[DOGS THAT BARK]

Thanks as always--Penwest sounds like my cup of tea--please let me know when listed here.

thought this might be of interest to you on Suncor

http://biz.yahoo.com/fool/060512/114745394413.html?.v=2

 

[DOGS THAT BARK]

Kirk Any of stocks you mentioned above look attractive yet--considering latest sell offs?

 

[selkirk]

DTB the brutal selloff continues up north. I have only done 3 trades recently. buying back two options and selling HBM, will update HBM in another thread that stock worked out well.

the markets are very volatile in base metals, and oil/gas. and especially gold (have no positions in gold as of now).

PWT.un will trade on NYSE around June 22, (give or take a few days). the stock is down 10% since the start of the month.

it fell 5.8% yesterday. most oil/gas stocks were off 5%. often when oil is off 1-2% these stocks fall 5-7%.

a $5 dollar drop in oil would see these stocks drop 15-20% if not more. people hate them with a passion.

on Toronto the market had its greatest point drop yesterday since 9-11. and the day before also drop another 200.

a sign of a weak market was Friday. early Friday nat. gas was up .10 and oil $1.50, even though some stocks popped a dollar or more, by noon most energy stocks only were up .25 or less.

however when oil drop $1.50 most of these oils can fall 5%. Suncor fell 4.8% yesterday.


back to PWE not a bad stock to look at, yields 10.42%.

would only start with a small positon, though. these markets are very volatile, and at times weak.

in base metals
Alcan is cheap,
Inco is cheap,
and Tek.b (toronto) is cheap, cheap, cheap.

would not buy any though as base metals stocks need to show some strength. not nice to buy a stock and then see the stock 20% lower.

will update later with more suggestions.

thanks
selkirk

 

[DOGS THAT BARK]

Thanks as always--

 

[selkirk]

just a note PennWest Energy Trust trades under symbol PWT.un Toronto.

PWE New York.

pays a .34 monthly cdn. dividend. which will work out at (current exchange .30US monthly to anyone who buys it on New York.)

own the trust and have for some time. biggest risk is a decrease in oil and natural gas prices.

payout ratio is low but this will trade in line with other energy stocks; has in the past.

natural gas is down from $7 to around $6.03. may want to wait to see the fallout of the increases in interest rates throughout the summer.

if people do buy this name or any other energy names mentioned should be only small positions at this time.

thanks
selkirk