Paul Bagnell and Rob Tétrault
Paul: Rob, your outlook on crude, was the market lulling itself to a sense of complacency by bidding crude up to 55 through the early part of 2017 with the likelihood I think a lot of people said that US shall is eventually are going to rarer it’s head.
Rob: Yeah, I think you’re spot on there. I think there was a little of the blinders that were happening there. Clearly, we hadn’t seen by the way, the range about trade of oil. We hadn’t seen something like that in almost a decade. You know, it had been between 50 and 55 for a very long period of time. What ended up happening, the speculators got really long and really aggressive. And what happened is you know, they’re wrong. Speculators are usually wrong and the producers are usual right, that’s why they’re in business. So, we ended up seeing a very long position on speculators, the largest we’d seen in almost 10 years and we ended up seeing the opposite on the producers’ side. So, the production was ended up being hedged at the highest level in almost 10 years. So, what happened is you got a huge spread there. Eventually, there are no more buyers. What happens when the speculators get out? We saw what we saw in the last few days here and you know, 7 to 8% correction, almost 10?
Paul: What kind of waiting do you have, or recommend in energy stocks producers?
Rob: Well you know, I’m a believer of owning energy. I like it. We’re not overweight or underweight specifically. We were slightly overweight you know, earlier. I think long-term it makes sense. We do like the fact that whether this is a large correction or not, it might be an opportunity to put a little bit of energy stocks in your portfolio. I’m not scared of a 10% move in energy because long-term I think we will see back to that range. And not only that, eventually the range will move to 55 to 60. And I’m somewhat bullish long-term on energy, long-term in a 3 to 5 year range. I think there’s nowhere to go for up. We do need to make our way through this glut, this huge inventory glut. I think we added eight billion barrels in the US last week, so, you know, five hundred and fifty billions of inventory is a significant inventory. We’ve got to make our way through that. But I think we all know consumption is up but I think long-term we’re going to get through this range now in the shift.
Paul: Well, the real market trends and developments that we’re seeing this far in 2017 is the decline relatively of the Canadian energy producers versus their US counterparts. Because of this idea of a potential boarder adjustment tax, that we’ve put a tax on imports of Canadian products into the United States. Have you taken advantage of those declines?
Rob: Yeah. If there’s an opportunity on a correction, we always like to buy on dips. And I specifically am not as scared as others of the fear of this boarder tax, I just don’t think it’s doable short-term. I don’t think that there’s any way that he’ll be able to implement that without a significant riot on their hands. So, I could tell you to be optimistic on the energy sector, I like to own it, I’ve been bullish on it for a while, so I can tell you to own, I think this is an opportunity for those who aren’t bullish o maybe get in here when oil is at 49/49.5.
Paul: You briefly touched on, at the top of the show, the big C and Q purchase of yesterday. Tell us why you like that deal.
Rob: Oh I like it. You know, last time I was on here we talked about Suncorp buying, a whole bunch of assets for 80 cents on the dollar. Any time you can buy an asset for 80 cents on the dollar, you know, I mean I’d buy anything for 80 cents on the dollar. I love seeing value there. And this is a great value play. They bought the assets, in my view, 50 to 60 cents on the dollar it was great timing. They needed the cash, they had it, it was an opportunity for them to do it. I love it, I think the stock is going to rise. I think it already has. It would have been nice to get them before but I continue to like that stock.
Paul: He’s Rob Tétrault on energy and in particular on Canadian Natural Resources, or CNQ. It was one of the big corporate stories of this week, a major purchase from Royal Dutch Shell. Rob likes that transaction.
Rob: The market has traditionally been overblown on both sides. We know that when there’s blood in the streets, we should be buying. Warren Buffett’s been saying it forever. I’m a firm believer of that. And whenever we see an oversell, which I think is what we had 2015 and in January and in February, it’s time to buy, it’s time to come in. And I believe that long-term again, we’re going to be happy we bought in February, March.
I don’t want the dividend, honestly! Don’t give it to me. Invest it, invest it, invest it. Take care of it and make me more money than I can make with my 1%.
I’m a Manitoban. I’m a homer at heart, that’s why I cheer for the jets. And I’m certainly not a bottom picker, because I do enough of that at home when I change the diapers for my 3 kids. So this is not something that I want to specifically pick the bottom for. We just want to reduce risk.
What you should care about, Rovinescu is all your investors, whether they’re short-term, long-term and medium-term. You need to care about everyone, anyone who owns a stock at that particular moment. And he clearly slapped them in the face today. And they called his bluff. And you know what? The stock’s down 10%.
To me, it strikes of trying to go all in, in a poker game with a pair of 6s, when you know you’re beat. I just don’t like that move at all today.
Its problem, after problem, after problem, and my dad used to tell me, “Where there’s smoke, there’s fire.” So…
If that’s a play you want to make, I mean, just be aware that it could go severely south, but there’s obviously a lot more upside. You can’t have it both ways. You can’t have your lunch and eat it, too, right.
I’m concerned about the stimulus, for sure and I’m concerned about the budget to be frank, because I feel its partially imprudent spending. It’s a lot of billions of dollars that we’re going to be short. And how are we going to pay it back? I don’t like, as you mentioned that there is no roadmap. When are we going to pay it back? When are my kids going to pay that back?
Michael: That’ll be the question for finance minister. Thank you, sir.
Rob: Is it keeping you up? Is it something that’s affecting your health? And if yes, get out. If you have a well built portfolio, if you have a diversified portfolio, you will be fine. One holding will not ruin your portfolio. Get out, cut ties, and move on.
Anyone who’s panicking, anyone whose losing sleep over the market right now, it’s time for you to call your advisors to make sure that you know what some of the amazing buying opportunities are out there.
Sometimes you’ve got to get on the train, right? If it’s running away, you’ve just got to get on it and go for the ride.
Go jets, go!
Michael: Rob Tetrault, the portfolio manager at National Bank Financial, joining us from Manitoba.