Daily Buy/Sell AdviserUnable to post the entire article so here's the link. GLTA
https://www.adviceforinvestors.com/news/bargain-stocks/a-bargain-stock-in-the-energy-sector-2/ A bargain stock in the energy sector
NOA is a compelling opportunity for value investors with a longer-term time horizon to own a wealth-generating company which can be bought today near its tangible book value.
Although stocks have recovered much of the lost ground from their worst lows in March, PI Financial analyst Devin Schilling argues there are still worthwhile value plays being overlooked, particularly those linked to energy.
Mr. Schilling is responsible for special situations research at PI Financial, which he joined in late 2014. Focusing in particular on small-cap companies that are not widely covered by analysts, his coverage has spanned marijuana companies, industrial firms, and consumer staples businesses. A chartered financial analyst, he is based in Vancouver.
He observes: “The black swan event formally known as COVID-19 wreaked havoc on financial markets as global economic activity ground to a halt. From peak to trough, the TSX declined by 37 per cent while the TSX Venture dropped 42 per cent, leaving few companies unscathed from the market’s plunge.” However, despite the very broad nature of the drop, the intensity and endurance of individual stocks’ setbacks have varied.
“Equities exposed to oil, directly or indirectly, faced further challenges as oil demand plummeted when supply ballooned as Russia and Saudi Arabia flooded the market with cheap oil. This one-two punch resulted in the price of oil collapsing, which left this sector deep in the red,” says the analyst. Under these circumstances, he says, “we continue to believe that strong balance sheets, extensive backlogs, and favourable valuations are key characteristics to seek out during the recovery phase.”
A compelling opportunity for value investors
Accordingly, his “top pick” selection to capitalize on the post-COVID recovery is North American Construction Group Ltd. (TSX—NOA), a heavy construction and mining services provider. “NOA is a compelling investment opportunity for value investors with a longer-term time horizon to own a wealth generating company which can be bought today near its tangible book value,” says Mr. Schilling, who underlines the company’s 26 per cent return on equity in 2019. “Although the oil market remains challenging, NOA has overcome adversity before and this downturn could result in a stronger, more diversified business.”