Nuvista Energy, Opportunity or Value Trap

Okay This one does not pay a dividend, I have taken a rather big position in NVA, and I am very excited about it.

It is trading at a serious discount to its assets. and there is nothing wrong with it as far as I can tell.

The price is now $6.25
The CIBC analyst said this about the stock when it was trading at $9.15

NuVista trades at 63% of Risked NAV and 4.2x 2011E EV/DACF versus its peers at 75% and 5.5x, respectively. We believe investors are not paying much for significant upside that NuVista has in its asset portfolio, hence our Sector Outperformer rating

According to their math, the stock is trading now at 43% of risked NAV and %72 or core NAV.
This means if you value all their unexplored (probable) and undeveloped (proven) reserves at $0 then take the assets that are currently producing discount them by 28% you'll get $6.25 a share

RBC Analyst also thinks this stock is undervalued, it is rated as Outperform, and given a price target of $9.00

Ontario Teachers is invested in this company. They own 18% of the stock. They last bought shares at $9.50 in March 2011 so we are getting a 35% discount to what Teachers paid. Those guys have done their research and invested 8 months ago. This gives me more confidence in this stock.

Daylight energy
These guys operate in roughly the same areas daylight energy is operating, which gives more confidence to the NAV numbers, The Chinese bought Daylight at 1.2x risked NAV here we have a chance to buy at 0.43x risked NAV.

Management Team
The CEO who recently joined comes from Talisman Energy an oil major and has many years of experience and seems like a very qualified guy for the job. I've read good praise about the management team from CIBC and RBC.

Earnings are coming out on Nov 10th, The company gave an operational update in August saying everything is on track to meet the projections.

It is clear that this stock is undervalued, when will it appreciate is a different story. The only risk I see to owning this is that you could miss out on the other oil and gas stocks that are cheap right now while waiting for this one to appreciate.

Oil Stocks are Undervalued

I Have been loading up on oil stocks lately because of record low valuations. Oil companies are a screaming buy right now. so cheap that the Chinese are willing to pay more than double the share price for Daylight Energy. 

from CIBC  analyst 

We view the sector's risk/reward as extremely compelling. The large caps

are only 13% off their lows reached in the 2008/09 financial crisis and the

sector is discounting only ~US$70/Bbl oil LT. Our top large-cap picks are

SU, TLM, NXY, & CNQ

Summary on Suncor: 

 Suncor Energy Inc. (SO–$46.00 Target): Our top pick remains Suncor, which we believe is one of the best-positioned companies against downside commodity risk. We believe the stock has far more defensive elements than the market gives it credit for (most FCF generation and one of the best balance sheets at US$70/Bbl) yet it has been among the worst performers during the recent downturn. Even with the sell-off in oil prices, Suncor is being well supported by high Brent and SCO premiums and exceptionally strong downstream results. Given the company’s operational momentum throughout Q3, we should see record CFPS from the company this quarter. Furthermore, following the recent completion of its major turnaround in the oil sands in Q2, we believe the company is now poised for ~18 months of relatively uninterrupted operations.

Summary on Talisman

Talisman Energy Inc. (SO–US$23.00 Target): In our view, Talisman is better situated now than at any time in the past five-plus years, as the company can lay claim to a well-defined unconventional gas portfolio and is demonstrating substantial and sustainable growth. Additionally, Talisman brings a compelling mix of highimpact exploration that could further extend those five-plus years of international growth visibility. Although Talisman does not have the same defensive characteristics as Suncor in the US$70/Bbl case, we note that even if it did have to cut capex by ~$500 million from our current forecasts, we would still expect ~9% of growth next year – one of the highest growth rates in our group. Additionally, we note that its balance sheet remains very strong even at the US$70/Bbl level. Talisman is also one of the least expensive on P/NAV metric – trading at only 42% of risked NAV. Furthermore, Talisman offers more exploration catalyst potential than any other Canadian large cap, in our opinion, which will be the defining factor for the stock’s performance in Q4/11. The company has high-impact wells planned for offshore Indonesia (South Makassar Strait) and Kurdistan but it is Colombia that most interests us given the lower risk, large size and relatively short cycle times.

Worlds First Fiat Currency

Fiat Money is Not New

The first time fiat money was ever used was in 11th century china, during the Yuan and Ming dynasties. Surprisingly this ended with hyper-inflation and the notes were discontinued in 1455.

That's a nice little fact, but then after more research it seems that every fiat currency ever used throughout history has ended in devaluation and eventual collapse. 

Fiat Money Never Worked

From Louis IV to Napoleon to Post-World War I Weimar Germany .The Treaty of Versailles was essentially a financial punishment placed on Germany to make reparations. The sums of money to be paid by Germany were enormous. (Huge unpayable debt, sounds familiar?)

Can you look at this graph that shows gold in USD and tell me that inflation is around 2% and that we need looser monetary policy because we are at risk of deflation. All that while keeping a straight face?

How does one profit from this eventual collapse?

The general idea is to own leveraged hard assets. of course the best hard asset to fit this bill is real estate. If you don't own your own home go buy one. It is possible that the gold bullion ship has already sailed but you can still find some gold miners trading at some good valuations.

The US dollar is a fiat currency like many before it throughout history, why would it be different this time?

How to profit from the eventuality peak oil using dividend stocks.

I was reading about the peak oil theory over at The Oil Drum and I came to the conclusion that peak oil ( the world reaching it's maximum oil production  as in the highest production amount possible in barrels per day ) will likely happen in our lifetime. ( oil will never run out only become more and more expensive to increase / maintain production levels )

So how does one profit from peak oil ?
Simply put, by investing in oil companies, especially ones with large oil reserves and long life assets.

What does that mean ?

It means oil Juniors like BMO Junior Oil Index ETF If you like the conservative hands off approach and don't mind paying 0.50% in management fees. Investing in Junior producers or exploration companies is a risky business that is why an ETF is a good idea.

What about unconventional oil ?
Yes Oil sands, Cardium, Bakken, etc are all good investments because of the large reserves and long production life.

Do you have any picks ?
My top pick is SUNCOR ( SU ) with 50 year plus reserve life, and a nav of 54$ a share it is trading at a huge discounted valuation. my other picks are DAYLIGHT ENERGY ( DAY ), PENN WEST PETROLUIM ( PWE ) and PETROBAKKEN (PBN) all of which pay dividends.

What if peak oil does not happen ?

Even If peak oil does not happen, some other energy crisis or oil bubble will happen sooner or later. Either escalation of the situation in Syria, Yemen, Iran, The middle east will have another crisis sooner or later.

Disclamer I am long SU, DAY, PWE and PBN. I am often invested in the companies I mention. I believe they are good investments otherwise I would not mention it.

Successful People are Proactive

Every hear you boss say the word proactive, or reaching out etc. These CEO buzz words used to make me giggle. I've met many Entrepreneurs and Business owners. What successful share in common is that they are proactive. They have an idea and they are relentless in going after it..

They follow through with it, by making phone calls assigning it to their employees etc. Then they keep following through by checking up on the progress and hounding the person working on it until the work is done. In other words they go and act on their ideas. They are proactive.

In my opinion being proactive is more important to success than being smart. How many people are smarter than their boss, many. If you look at technology companies you'll find very smart engineers working for some guy with either a business degree or sometimes no degree at all. These proactive dumb dumb's surrounded themselves with smart people and so do not need to be smart themselves. That is why being proactive is more important to success than being smart.

RIM is the next Nortel ? Nope, Not at all, Buy RIM now.

I went to Future shop to check out the playbook. Though I would never spend 600$ on a gadget playbook or Ipad as you can see my previous post. Other people do buy such devices and pay a lot for it. I took a look at the device, played a game of tetris on it, watched some movie previews. it seems like perfectly good tablet. 

I also spoke to my cousin, who is a doctor that does not know anything about investing his money other than buying high MER mutual funds. When I suggested RIM to him he said that RIM is going to go bankrupt like Nortel. so that makes me think that the sentiment is very very negative.

Now here are the reasons why you should invest in RIM at 26$

1. Each share has 5.48$ worth in cash.

2. The remaining 21$ of valuation is 4.3 P / E

For those who do not understand P / E it means assuming that RIM does not grow its earnings 1 cent more, even thought the smartphone sector is exploding. Each share will earn the remaining 21$ in 4.3 years.

This compares with 4.9 P/E for nokia ( RIM is now cheaper than nokia !!! ) and 11.8 P / E for Apple

Here is what The CIBC analyst had to say, with a price target of  65$ :

At these depressed levels, we continue to recommend buying the shares. Our view is that the product transition is now well advanced with delays
already anticipated in the share price. The product refresh will help restart
shipment growth later in F2012.

so to recap, go buy some RIM shares,
you have panic,
you have good valuations
you have experts calling it cheap
you have limited downside

Disclaimer I have a covered call position in RIM

Luck Favours the Prepared

How often do you come across a great opportunity that you cannot take advantage of either because you were fully invested in something else. or because you were too slow to react because of the many distractions that eat up your time.

That is why I believe that being prepared to take advantage of these lucky opportunities that present themselves is just as important as the opportunities themselves. It doesn't matter how great the price of this property because the owner is an ignorant divorcee wife or the panic that is going on with RIM at the moment. If you are not prepared to take advantage of the situation you will not gain anything.

Many people got rich from the recession, Think about it, was it luck? The same opportunities were available to everyone. However only the prepared were able to take advantage of the panic. Now we call them Lucky.

How can you be prepared? It is simple. never be 100% invested. always keep some cash or credit available. you could tie it up for that 3 or 4% returns, or you can sit on it and wait even for 1 or 2 years for that great deal that will give you 20% or 30% returns.

How much money is sitting on the side lines ?

 I was reading a monthly report about Canadian asset management companies, I want to share this graph.

Bulls make money when the market goes up, Bears make money when the market goes down, and Pigs get slaughtered.


There is only 1 type of investor who holds money in a money market fund in an investment managed by an asset manager. The Pig. pigs invest in a money market mutual funds, instead of high interest savings accounts because they don't know better.

And this graph is telling us that the pigs have been deploying their cash. in fact they are holding less cash than before the recession.

CIBC 2011 Top Picks

 I wanted to share this,  some of these are dividend stocks.

CIBC's did a good job with their 2010 top picks but ofcourse even a monkey picking stocks out of a hat would have made money in 2010 but I do give them get some credit for beating the index.

T1213 Request to Reduce Tax Deductions at Source for Year(s) _____

Go download T1213, print, fill out, then mail this form to CRA.

also make sure you already gave your employer the correct TD1 , and if you are in Ontario TD1ON

why overpay your taxes, I'd rather pay what I owe when its due. 

you don't over your credit card, or gas bill. why would you over pay your tax bill?

Jan 4 2011 RRSP and TSFA contribution day

Now that the year is over, it is time to make a new contribution to the Dividend Lover RRSP and TSFA portfolios.

January 4th the first trading day of 2011 is a great day to make TSFA and RRSP contributions. It is a great day for contributions because you get the most the most tax advantaged growth time since it is the earliest day you can a contribution.

People who make their 2010 RRSP contributions on March 31 2011 have missed on 15 months of tax deferred earnings. since they could have done their 2010 RRSP contributions on Jan 4, 2010

I hold Canadian REIT's in my RRSP because enjoy the tax efficiency. i had already picked out  HR.UN as the new investment in both accounts since it is offering the best discount to NAV among the large cap REITS

I always preach, make your contributions asap to maximize the tax advantaged growth time, especially when it comes to your TSFA. If you do not have enough money to contribute to both early contribute to your TSFA first

The New Year Resolution Crowd

Today is the 3rd week of January, The peak time for failed new years resolutions.

Anyone who works out at a gym gets a front row seat to the new year resolution madness. by now we will notice the decline of these tubby new faces who started showing up at our gyms.

I believe that the reason why these new years  resolutions fail is because the group of people who make these resolutions generally fail at most things they attempt. quite the bold statement I know.

If there is something that needs to be done, like going to the gym, or quitting smoking or saving more money or whatever new years resolutions tend to be. It is something that needs to be done and if you are the successful type, you go off and make it happen.

However a new years resolution person is not willing to do it. The new years resolution is just another excuse to talk about doing things.  And right about now is when this group of people give up and we can have our gyms back.