Nuttall's top pick
MARIJUANA NEWSOPINIONPURSUITSPOLITICSBITCOINREAL ESTATETECHNOLOGYINVESTINGVANCOUVER MARKET CALL ARTICLE MARKET CALL Investing Apr 17, 2018 Eric Nuttall's Top Picks: April 17, 2018 BNN.ca Staff This content is not currently available for viewing in a mobile browser. Now Showing Full episode: Market Call for Tuesday, April 17, 2018 45:46 Full episode: Market Call for Tuesday, April 17, 2018 Up Next Eric Nuttall's Top Picks 4:10 Eric Nuttall's Top Picks Eric Nuttall's Past Picks 4:46 Eric Nuttall's Past Picks Eric Nuttall, partner and senior portfolio manager, Ninepoint Partners Focus: Energy stocks _______________________________________________________________ MARKET OUTLOOK Oil is in a multi-year-long bull market and WTI is likely to trade over $70 a barrel in 2019 and over $80 in 2020. The oil glut has disappeared, with OECD oil inventories falling by the fastest pace in history (334 million barrel surplus in January 2017 to a 20 million barrel deficit in March 2018), indicating an undersupplied market. With oil demand growth of about 1.8 million barrels per day this year and OPECs continued strong compliance to its production cut, we see inventories continuing to fall and reaching a 10-year low by year-end. Looking to 2019 and beyond, even with the full amount of OPEC shut-in production returning to the market, we see inventories continuing to fall in the coming years with spending, labour, equipment and pipeline constraints on U.S. production and non-U.S., non-OPEC production about to enter into a multi-year decline. Eventually the oil price will have to rise high enough to rationalize demand in order to find balance, as the four to six-year lead time on large-scale mega projects prevents the industry from reacting quickly enough to any price spike or supply interruption. While the U.S. is good, it isn't good enough to meet global demand growth and offset the impact of non-U.S., non-OPEC production declines, with OPEC having limited ability to grow for the next several years due to underinvestment. While sentiment remains close to all-time historic lows, there are signs of optimism emerging. The energy market has begun to outperform the broader market even on days when oil is down. Strategists are upgrading the sector and corporate M&A has begun. We see the potential to make over 100 per cent on many situations. The risk versus reward in the energy sector has never been better in my 15-year career. TOP PICKS Eric Nuttall's Top Picks Eric Nuttall, partner and senior portfolio manager at Ninepoint Partners, shares his top picks: Athabasca Oil, FTS International and WPX Energy. ATHABASCA OIL (ATH.TO) Athabasca offers the highest leverage to a bullish oil outlook (or even where oil is at today) with a $5-move in WTI equal to 10 per cent of their current market capitalization. While excess leverage has been a problem in the past, we see the potential for them to monetize part or all of their infrastructure and be debt-free within the next four to six months. Offering a 15 per cent production growth compound annual growth rate (CAGR) over the next several years, the company is growing fast enough to attract U.S. investors. They're doing this while also having the potential to initiate a share buyback, given that the stock is trading at only a 15 per cent premium to its blowdown valuation and less than half of its proved reserve value. We see Athabasca becoming the go-to oil beta name when sentiment firmly turns. We see the potential for a double from current levels (which would only get them to proved reserve value).