The Panic-Proof Portfolio (Stockchase Research)Cenovus EnergyCVE.TOTOP PICKMar 07, 2023

Excellent company that is top holding in portfolio. Excellent management team with executing. Believes stock buybacks will commence within next month or two. Between 75%-100% free cash flow will be dedicated to return of capital. Excellent assets in oil sands and refineries. Will continue to hold and buy more. 

We do not think Trans Mountain will influence values much. Prices, with global influences, will continue to have a bigger impact. The stock is cheap at 8X earnings and offers a decent, growing dividend. It is one of the few in the sector expected to see per-share growth in '24, in the 20% or so range. Debt is down to 1X cash flow and the share count continues to decline. 3Q results were strong, with good growth and lower debt, though refining margins remain a possible negative variable. Overall, though, it looks fine to us. 
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For Baytex there is some consolidation here due to some nervousness re the price of oil. Cenovus is similar to Baytex and has dropped to the consolidation level. It could go to the $20 level in the next 3 to 6 months. Don't buy energy now since it could retrace much of its big gains.

Debt drawdown taking longer than thought due to weaker oil. Other issues have been fixed. Waiting to hit $4B of debt, and he sees it happening in Q2. Shareholders should be getting 100% of free cashflow early next year. Sees 40-80% upside. 35 years of inventory. Solid, steady CEO. High-quality reservoirs. Yield is 2.34%.

Likes it though prefers Baytex for its free cash flow. Cenovus has some downstream issues and balance sheet issues. Has done well this year, though.

Likes the energy space. Good company, though he prefers other names. Higher oil prices will increase cashflows. Returning more money to shareholders. Oil companies will be profit and cash machines if oil stays in $80 range. 

One of the better Canadian oil/gas names. Likes their assets. Higher oil prices have raised the share price. Lots of free cash flow created that has reduced debt, so now a strong balance sheet. Shares are near all-time highs, so wait for a pullback.

Management team assuring production/refinery issues not a concern. Expecting company to hit $4 billion debt target in January 2024. At least 30 years of long dated inventory. Not expecting M&A anytime soon. Trading around ~4x free cash flow at $80 oil. Expecting ~$38 share price at $80 oil. Will continue to own shares at 11% of fund. 

Egress on heavy oil in Canada a concern. Recent EIA reports on Gasoline demand lower. Would hold at this time. Expecting lower oil prices. Does not own shares. 

Remains bullish on oil prices ($85-$100).
Meaningful leverage to $90 oil price.
January 2024 will see 100% return of capital to shareholders.
Currently trading at 17% to cash flow.
Expecting 50% upside at current oil price. 
Current share price undervalued. 

2027 bond issue specifically.
Good if economy enters into a recession.
Expecting short terms rates to go down.
~6% yield is very safe.
Energy space very strong. 

Remains very bullish on oil, so he's looking for leverage to that call. Material discount to peers. Quickly getting to the threshold of paying investors 100% of free cashflow. 17% free cashflow yield at current oil price, 22% at $100 oil. Bullet-proof balance sheet. Yield is 2.19%.