BNN Bloomberg Market Call – Michael Sprung’s Top Picks and Outlook, July 24, 2019

MARKET OUTLOOK

Global trade conflicts are beginning to impact economic outcomes in very fundamental ways. The disruption is evident in both the bond and equity markets.

In the second quarter, markets reflected the fear and uncertainty investors are facing. This has been most evident in bonds, with 10-year U.S. Treasury notes repeatedly indicating expectations of economic growth are diminishing. The equity markets have reacted with greater volatility in pricing, as market participants continuously adjust directions to often conflicting data.

We’re in the eleventh year of what has been the longest economic expansion in modern history. In part, credit must be given to the overly accommodative monetary policies of the global central banks following the financial crisis. These policies have allowed the developed economies to partake of a sustained period of tightening labour markets in an environment of low inflationary pressures. While politicians may have thought that they’ve discovered the elixir to defeat the business cycle, there have been excesses and imbalances percolating below the surface, not the least of which are massive debt levels in both the public and private sectors. With the prospect of slower economic growth, central banks are likely to continue to restrain rates.

A big concern is that if central banks in developed nations respond to a recession threat with massive fiscal and monetary stimulus, it could lead to a result similar to Japan in the ‘90s: three decades of low growth, low rates and even larger deficits (this would still be preferable to a total meltdown). While we don’t believe the business cycle has been defeated, we don’t think that a protracted period of stagnant growth needs result from policy initiatives. Technology is accelerating change and productivity enhancements are likely to follow.

TOP PICKS

ENCANA, ECA

Encana is a leading North American oil and gas producer focused on the Montney, the Permian and the STACK/SCOOP resource areas. Since closing on the Newfield acquisition earlier this year, investors will be focused in the company’s expertise in exploiting these assets. Encana continues to make progress in shedding non-core assets. Over the past few years, management has drastically reduced operation expenses and improved efficiencies. The stock is severely undervalued in the market as investors have all but abandoned the energy sector over the past few years. Eventually, we believe they’ll recognize the company’s ability to throw off free cash flow from its extremely well managed assets.

ALARIS ROYALTY, AD 

Alaris invests in a diversified range of North American private companies with the objective to generate cash flows to support dividends to shareholders. Over the past few years, the company has worked through a number of issues with a few investee firms that presented some challenges. During this period, investors became concerned as to whether these workouts were taking the focus away from capital deployment. Despite these issues, the dividend was maintained. Alaris is back on track, deploying funds in new opportunities. We anticipate that the payout ratio will decrease over the next few years as cash flows increase. The stock is attractively valued and yields around 8.1 per cent at current levels.

TC ENERGY, TRP

TC Energy is one of the largest energy infrastructure companies in North America, focusing on natural gas and liquids pipelines and energy (mainly power generation). Its key gas pipeline assets of over 67,000 km include the main Alberta gas gathering system (the NGTL), the Canadian Mainline, ANR, Columbia Gas and Mexico. Its liquids pipeline network includes the Keystone pipeline system. The company’s energy business consists of 10,000 megawatts of generation capacity in Canada and the U.S. and 118 billion cubic feet of unregulated gas storage. That said, it has announced the sale of its U.S. merchant power portfolio. The recent sale of its stake in the Northern Courier Pipeline further adds to TC Energy’s progress in deleveraging the balance sheet. The company is working to develop $25 billion of near-term secured growth projects. It sees an 8 to 10 per cent dividend growth per year out to 2020. At current prices, the stock is yielding 4.5 per cent.

You can watch the complete Market Call interview here>>

We believe clients are more concerned about losing money than making speculative gains. Like to learn more? Please contact us here>>

The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

BNN Bloomberg Market Call – Michael Sprung’s Top Picks and Outlook, January 15, 2019

Outlook:

2018 started with a great deal of investor optimism. Global economies were growing, US tax cuts were predicted to be a boost to earnings, interest rates were still at low levels and expectations were that international trade tensions would be reasonably resolved. What a difference a year makes!

2018 started with a great deal of investor optimism. Global economies were growing, US tax cuts were predicted to be a boost to earnings, interest rates were still at low levels and expectations were that international trade tensions would be reasonably resolved. What a difference a year makes!

As 2018 closed, global economies are no longer synchronized in a positive manner (some have actually contracted), tax cuts have boosted earnings in the US but a lot of the returns to shareholders have been in the form of stock repurchases at high valuations. The prospects for continued accelerating earnings have been diminished with no great catalysts in sight. Interest rates have increased causing concerns over debt burdens. Trade disputes, particularly between the US and China, have contributed to market jitters.

Expansions and contractions are normal phenomena in the market cycle. It is not atypical to see a sudden and dramatic end to advancing markets. It is entirely possible the current selloff may continue for some time but we see some positive outcomes. Valuations are dropping with prices. Where we have been having difficulty finding attractive opportunities, more are now coming into focus. Investors will now focus more on longer term, fundamental valuations.

Invest in solid, well financed and managed companies. While we continue to advise caution, invest incrementally as you identify candidates for investment.

Top Picks:

Bank of Nova Scotia, BNS-T, Owned personally and by clients, Last Purchase September 2016, $69.85
The Bank of Nova Scotia is the most international of the Canadian banks with branches in the Caribbean, Central and South America. Loan growth in the Latin American markets has been robust. To date there has not been any apparent deterioration in credit quality. Given BNS’s geographic footprint, operations are in areas sensitive to commodity prices that have recently exhibited higher levels of volatility. The current yield of 4.8% is attractive as are the relative valuation parameters to its peers.

Vermillion Energy Inc., VET-T, Owned personally and by clients, Last Purchase April 2018, $45.51
Vermilion Energy has interests in oil and gas producing properties in Western Canada, France, Germany, the Netherlands and Australia as well as a substantial non-operated interest in the Corrib natural gas field off the northwest coast of Ireland. Vermilion is well managed with a solid balance sheet. At today’s commodity prices, Vermilion generates free cash flow that supports the current yield of 8.6%. Its geographically diversified operations should contribute to a growing production profile over the next few years. The energy sector has been particularly weak over the past year leading to some very attractive valuations for a number of companies.

TransCanada Corporation, TRP-T, Owned by clients, Last Purchase December 2015, 46.63
TransCanada Corporation (TRP) is one of the largest energy infrastructure companies in North America, focusing on natural gas pipelines, liquids pipelines, and energy (mainly power generation). Its key natural gas pipeline assets of over 67,000 km include the main Alberta gas gathering system (the NGTL), the Canadian Mainline, ANR, Columbia Gas, and Mexico. Its liquids pipeline network includes the Keystone pipeline system. TRP’s energy business consists of 10,000 MW of generation capacity in Canada and the United States and 118 bcf of unregulated gas storage. That said, it has announced the sale of its U.S. merchant power portfolio. TRP is working to develop $25b of near-term secured growth projects. The company sees 8-10% dividend growth per year out to 2020. At current prices, the stock is yielding 5.1%.

You can view the complete BNN Bloomberg interview here>>

We believe that investment management is about managing risk, not chasing speculative returns. Like to learn more? Please contact us here>>

The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

 

TransCanada Corporation (TSE:TRP) secures long-term deals with gas producers

Pipeline company TransCanada Corporation (TSE:TRP, Mkt cap 53.03B, Div/yield 0.62/4.09, EPS 0.28, Shares 866.91M) has successfully concluded a long-term, fixed-price open season to transport natural gas on the Canadian Mainline to Eastern Canada.

The Calgary-based company said on Monday that gas producers in the Western Canada Sedimentary Basin (WCSB) have agreed binding, long-term contracts for the transport 1.5 GJ/d of natural gas from the Empress receipt point in Alberta to the Dawn hub in Southern Ontario, at a single toll of $0.77/GJ.

TransCanada  long-term deal gas producers

TransCanada Corporation (TSE:TRP) secures long-term deals with gas producers

​The contracts have a term of 10 years, with early termination rights that can be exercised following the initial five years of service (upon payment of an increased toll for the final two years of the contract).

Russ Girling, president and CEO of TransCanada, said in a statement: "Today, WCSB producers are facing a much more challenging landscape than they have in the past. This new offering helps our customers compete more effectively by utilizing existing capacity on the Canadian Mainline, and demonstrates the importance and value of this system to deliver their products to markets in Eastern Canada and the Northeast U.S."

Girling added: "This long-term agreement provides significant benefits for our customers, shareholders, communities and governments that depend on the economic benefits that are generated by natural gas exploration, production and transportation. In addition to utilizing existing capacity and pipelines already in operation, the incremental revenue generated from this offering will make the Canadian Mainline more competitive."

Madison.com reported that TransCanada did not give up after its last open season to get gas producers in Western Canada to sign up for capacity on the pipeline failed. "That persistence has now paid off," the website said, with the simplified rate and early termination option proving to be a winning combination.

Most of the incremental revenue from these new contracts will flow to TransCanada's bottom line, Madison.com explained.

The Canadian Mainline currently transports about 20% of the natural gas produced in the WCSB to serve Canadian markets and interconnects with the United States.

TransCanada Corporation (TSE:TRP) is a Canadian energy infrastructure company with head offices in Calgary, Alberta. The Company operates through three segments: Natural Gas Pipelines, Liquids Pipelines and Energy. Natural Gas Pipelines and Liquids Pipelines consist of its respective natural gas and liquids pipelines in Canada, the United States and Mexico, as well as its regulated natural gas storage operations in the United States. Its natural gas pipeline network transports natural gas to local distribution companies, power generation facilities and other businesses across Canada, the United States and Mexico. Its existing liquids pipeline infrastructure connects Alberta and the United States crude oil supplies to the United States refining markets in Illinois, Oklahoma and Texas, as well as connecting the United States crude oil supplies from the Cushing, Oklahoma hub to refining markets in the United States Gulf Coast. Energy includes its power operations and the non-regulated natural gas storage business in Canada. More from Reuters »

What is Successful Investing? Learn more here>>

Download Our Free Special Report – How to Hunt For Value Stocks. Michael Sprung will share with you 5 stocks set for long-term gains here>>

We believe that clients gain from our focus on the long-term fundamentals and not chasing short-term trends. Like to learn more? Please contact us here>>

The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

Oil Pipelines – Canadian Government approves two major pipeline projects

Oil Pipelines Canadian Government approved

Oil Pipelines – the Canadian Government has approved two major crude oil pipeline projects and rejected a third.

The Canadian Government has approved two major crude oil pipeline projects and rejected a third.
Minister of Natural Resources, Jim Carr, and Minister of Transport, Marc Garneau, announced on Tuesday that Kinder Morgan’s C$6.8bn Trans Mountain Expansion Project had been given the green light, subject to 157 conditions.

The Government has also approved Enbridge‘s Line 3 Replacement Project, subject to 37 conditions. Enbridge is planning to replace 1,067 km of existing pipeline from Hardisty, Alberta, to Gretna, Manitoba, to enhance the safety of the line and restore its original capacity of 760,000 barrels a day.

But another Enbridge project, the long-stalled Northern Gateway pipeline, will not proceed because it would result in crude oil tankers transiting through the sensitive ecosystem of the Douglas Channel, part of the Great Bear Rainforest, the Government said.

Enbridge welcomed the approval of the Line 3 replacement program, the largest project in its history at approximately C$7.5bn.

“We have strong support for the project from our communities along the route, including Indigenous communities,” the company said in a statement.

Commenting on the rejected Northern Gateway pipeline, the company expressed disappointment with the decision and said it was an important project to ensure Canada gets its resources to international markets.

“Northern Gateway also represented an unprecedented partnership with Indigenous people,” Enbridge continued. “The 31 Indigenous communities who had a one-third ownership in Northern Gateway stood to realize C$2bn in benefits to their communities and would have played an important stewardship role in the project.”

The Government also announced a moratorium on crude oil tankers along British Columbia’s northern coast.

What is Successful Investing? Learn more here>>

Download Our Free Special Report – How to Hunt For Value Stocks. Michael Sprung will share with you 5 stocks set for long-term gains here>>

We believe that investment management is about managing risk, not chasing speculative returns. Like to learn more? Please contact us here>>

The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

 

TransCanada Keystone pipeline halted following spillage

North American energy company TransCanada Corporation (TSE:TRP, Mkt cap 34.60B, P/E – , Div/yield 0.56/4.57, EPS -1.75, Shares 702.34M) has cut the power at its Keystone pipeline following an oil spill in South Dakota, a spokesman for the firm has confirmed.

TransCanada Keystone

TransCanada – Keystone pipeline halted following spillage

TransCanada’s Mark Cooper revealed that the spill was spotted by a local landowner around noon local time on Saturday who swiftly made the matter known to the company.

Following the call, the pipeline was brought to a halt in a matter of minutes, according to Cooper.

“As soon as we got that report in we immediately began efforts to shut down the pipeline and crews were immediately dispatched to the site,” he said.

Cooper then proceeded to play down the extent of the spillage, stating that it covered a “small surface area” and no significant impact to the environment was observed.

The company will continue to investigate the source of the spill, which was found about six kilometres from TransCanada’s Freeman pump station, which sits roughly 60 km southwest of Sioux Falls, S.D.

Cooper confirmed that it has also informed landowners and local agencies in the area as well as regulatory agencies including the National Response Center and the Pipeline and Hazardous Materials Safety Administration.

The Keystone pipeline, which carries about 500,000 barrels of oil a day, begins its journey at Hardisty, Alta., east through to Manitoba before it turns south to markets in the American Midwest and U.S. Gulf Coast.

This latest incident will have done little to help TransCanada’s cause to push through its proposed 4,600-kilometre Energy East Pipeline that would ship Alberta crude to New Brunswick.

TransCanada Corporation is a Canadian energy infrastructure company with head offices in Calgary, Alberta. The Company operates through three segments: Natural Gas Pipelines, Liquids Pipelines and Energy. Natural Gas Pipelines and Liquids Pipelines consist of its respective natural gas and liquids pipelines in Canada, the United States and Mexico, as well as its regulated natural gas storage operations in the United States. Its natural gas pipeline network transports natural gas to local distribution companies, power generation facilities and other businesses across Canada, the United States and Mexico. Its existing liquids pipeline infrastructure connects Alberta and the United States crude oil supplies to the United States refining markets in Illinois, Oklahoma and Texas, as well as connecting the United States crude oil supplies from the Cushing, Oklahoma hub to refining markets in the United States Gulf Coast. Energy includes its power operations and the non-regulated natural gas storage business in Canada. More from Reuters »

What is Successful Investing? Learn more here>>

Download Our Free Special Report – How to Hunt For Value Stocks. Michael Sprung will share with you 5 stocks set for long-term gains here>>

We believe that clients gain from our focus on the long-term fundamentals and not chasing short-term trends. Like to learn more? Please contact us here>>

The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

TransCanada signs up ABB to build ‘e-houses’ for its Energy East Pipeline

TransCanada Corporation (TSE:TRP, Mkt cap 33.76B, P/E 20.38, Div/yield 0.52/4.33, EPS 2.36, Shares 709.00M) and ABB announced today that they have shaken hands on a deal that will see ABB deliver a number of multi-million dollar electrical houses along the Energy East Pipeline.

TransCanada ABB Energy East Pipeline

TransCanada signs up ABB to build ‘e-houses’ for its Energy East Pipeline

TransCanada said the agreement will benefit the Québec economy, with it expected to create 120 jobs in the province and a further 90 spin-off jobs outside of the greater Montreal area.

“This agreement demonstrates our ongoing commitment to hire local suppliers to safely build this piece of national energy infrastructure and support job creation in Québec,” said John Soini, president, Energy East Pipeline Project.

The ‘e-houses’, which are required to power pump stations to ensure safe and GHG-efficient operations, are slated to be manufactured at a new production facility in the greater Montreal region.

ABB Canada, a division of ABB Group, will be tasked with making at least 22 e-houses, with each one custom-designed to TransCanada’s requirements – which includes a compact design to minimize the impact on the local environment.

“We are already very active in Québec, spending $100 million in contracts with more than 250 suppliers over the last three years alone,” added Soini. “This includes $25 million in service contracts in preparation of the project. We look forward to continuing to work closely with Québec suppliers as we develop the project and will work to develop further opportunities.”

In a statement, TransCanada highlighted how the Energy East project will create over 3,000 jobs each year in Québec during the nine years of planning and construction for the pipeline, along with $972 million in tax revenue for the province. When the pipeline goes into service, total tax revenues for Québec will amount to $1.2 billion for the first 20 years of its operation, it claims.

TransCanada Corporation is a Canadian energy infrastructure company with head offices in Calgary, Alberta. The Company operates through three segments: Natural Gas Pipelines, Liquids Pipelines and Energy. Natural Gas Pipelines and Liquids Pipelines consist of its respective natural gas and liquids pipelines in Canada, the United States and Mexico, as well as its regulated natural gas storage operations in the United States. Its natural gas pipeline network transports natural gas to local distribution companies, power generation facilities and other businesses across Canada, the United States and Mexico. Its existing liquids pipeline infrastructure connects Alberta and the United States crude oil supplies to the United States refining markets in Illinois, Oklahoma and Texas, as well as connecting the United States crude oil supplies from the Cushing, Oklahoma hub to refining markets in the United States Gulf Coast. Energy includes its power operations and the non-regulated natural gas storage business in Canada. More from Reuters »

What is Successful Investing? Learn more here>>

Download Our Free Special Report – How to Hunt For Value Stocks. Michael Sprung will share with you 5 stocks set for long-term gains here>>

We believe that clients gain from our focus on the long-term fundamentals and not chasing short-term trends. Like to learn more? Please contact us here>>

The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

TransCanada not prepared to write off Keystone XL

TransCanada Corporation (TSE:TRP, Mkt cap 29.59B, P/E 17.72, Div/yield 0.52/4.98, EPS 2.36, Shares 708.95M) is nothing if not determined with its Keystone XL pipeline. On hearing that U.S. President Barack Obama had formally rejected the energy project on Friday (6 Nov.), the firm declared it was “absolutely committed” to seeing it through, the Financial Post reports.

“Today, misplaced symbolism was chosen over merit and science – rhetoric won out over reason,” TransCanada’s president and CEO Russ Girling told the media shortly after Obama’s White House news conference to announce his decision on the long-delayed pipeline.

transcanada president russ girling

“Today, misplaced symbolism was chosen over merit and science – rhetoric won out over reason,” TransCanada’s president and CEO Russ Girling

Girling suggested that the fight to get the project off the ground didn’t end with the president’s rejection, with talk of a new application for a border-crossing pipeline being submitted. This, too, would require presidential approval.

The Keystone XL project has now been active for seven years, suffering setback after setback and consuming $2.8 billion of the company’s capital.

TransCanada had hoped a request to suspend the latest review would bide itself some time to apply for state-level approvals for its route through Nebraska.

However, documents released by the State Department on Friday revealed that the U.S. Secretary of State John Kerry had signed the recommendation to reject Keystone XL the next day, Tuesday.

Then on Wednesday, Kerry formally denied TransCanada’s suspension request, after he had recommended Obama reject the pipeline.

Obama rejected Keystone XL on the grounds that “shipping dirtier crude oil into this country would not increase America’s energy security.”

Commenting on the impact of the $2.8 billion that’s already been spent on the project, FirstEnergy Capital Corp. analyst Steven Paget said in a research note that TransCanada could write it off, which would have a one-time effect on its earnings.

TransCanada Corporation is a Canadian energy infrastructure company with head offices in Calgary, Alberta. The Company operates through three segments: Natural Gas Pipelines, Liquids Pipelines and Energy. Natural Gas Pipelines and Liquids Pipelines consist of its respective natural gas and liquids pipelines in Canada, the United States and Mexico, as well as its regulated natural gas storage operations in the United States. Its natural gas pipeline network transports natural gas to local distribution companies, power generation facilities and other businesses across Canada, the United States and Mexico. Its existing liquids pipeline infrastructure connects Alberta and the United States crude oil supplies to the United States refining markets in Illinois, Oklahoma and Texas, as well as connecting the United States crude oil supplies from the Cushing, Oklahoma hub to refining markets in the United States Gulf Coast. Energy includes its power operations and the non-regulated natural gas storage business in Canada. More from Reuters »

What is Successful Investing? Learn more here>>

Download Our Free Special Report – How to Hunt For Value Stocks. Michael Sprung will share with you 5 stocks set for long-term gains here>>

We believe that clients gain from our focus on the long-term fundamentals and not chasing short-term trends. Like to learn more? Please contact us here>>

The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.

 

TransCanada calls $654m Ironwood Power Plant acquisition a “unique opportunity”

TransCanada Corporation (TSE:TRP, Mkt cap 32.02B, P/E 18.54, Div/yield 0.52/4.61, EPS 2.44, Shares 709.00M) believes it has acquired a “unique opportunity” in agreeing to buy a gas-burning power plant in Pennsylvania for US$654 million from Talen Energy Corp.

TransCanada Ironwood Power Plant acquisition

TransCanada calls $654m Ironwood Power Plant acquisition a “unique opportunity”

Calgary-based TransCanada says the 778-megawatt Ironwood power plant in Lebanon, Penn., is a “natural extension” of its northeast power business, where the company now has over 4,500 megawatts of generating capacity.

Russ Girling, TransCanada’s president and chief executive officer, said the acquisition strengthens its portfolio of assets in the region.

“This relatively new and highly efficient gas-fired power plant provides us with a solid platform from which to continue to grow our already substantial wholesale, commercial and industrial customer base in this market area,” he said in a statement.

TransCanada, better known for its pipeline business, explained the Ironwood power plant delivers energy into the PJM power market, North America’s largest and most liquid energy region which includes a three-year forward capacity market.

The firm added that its proximity to the Marcellus shale gas play makes it well positioned to access competitively priced natural gas in a market that is currently transitioning away from coal-fired power generation to gas.

The Ironwood acquisition will immediately add to earnings and cash flow and generate about US$90 to $110 million in earnings a year before interest, taxes, depreciation and amortization, TransCanada said.

“The Ironwood power plant will be very complementary to our U.S. northeast operations, which now total over 4,500 MW, and is consistent with our disciplined approach to growth in this important region where we have been operating on the power side since 1998,” added William Taylor, TransCanada’s executive vice-president and president, Energy.

It will fund the acquisition with a combination of cash on hand and available credit. That deal is expected to be wrapped up in the first quarter of 2016.

What is Successful Investing? Learn more here>>

Download Our Free Special Report – How to Hunt For Value Stocks. Michael Sprung will share with you 5 stocks set for long-term gains here>>

We believe that clients gain from our focus on the long-term fundamentals and not chasing short-term trends. Like to learn more? Please contact us here>>

The opinions expressed here are ours alone. They are provided for information purposes only and are not tailored to the needs of any particular individual or company, are not an endorsement, recommendation, or sponsorship of any entity or security, and do not constitute investment advice. We strongly recommend that you seek advice from a qualified investment advisor before making any investment decision.