I got asked by a reader to write about three companies today: Cameco, Silver Standard Resources, and Cenovus energy. Of the three, the only one I know really well is Cenovus, so I will start with this one.
Cenovus is an about-average Oil play. It ranks up there with CPG, but below WCP and ARX which are IMO better long-term oil plays. It’s a large capitalisation company, but not necessarily less risky than other interesting oil plays. It also ranks well below other classics such as CNQ.
Overall, while this is a decent company, it is unfortunately in a dying sector. To clarify: oil won’t die anytime soon, but oil stocks will. Furthermore, its debt load is too high and I disagree with some of their latest acquisitions which, unlike Suncor, made little ssense to me. It’s doubtful you can make any kind of meaningful return – for the risk – over the next 3 years, so why bother?
My preference in the sector would be some diversified company such as CNQ, IMO or Suncor. Barring that, I would buy the pipelines, especially ENB and TRP.
All in all, while the valuation is attractive and while this is a solid company, I simply cannot see enough reasons to buy CVE today. And unless you anticipate a return to the $80+ per barrel oil, you shouldn’t either.
Look: I’ve lost a lot of money on energy and I’ve accepted it’s money I will never get back. It happens. My only real oil stocks right now (apart from diversified holdings) is TSE:SGY and I would buy this company before CVE, even despite the size difference. At least with SGY, you get a potential decent reward.
I’ve heard of this company but would have never considered investing in it. Uranium is not something I understand or am even remotely knowledgeable about and I tend to avoid sectors I don’t know. Plus, it could be compared to a mining company, which I hate and never invest in.
That being said, I have heard of their tax problems, which I feel is going to be resolved with a small payment. I think the company will survive, but in what shape? It’s not particularly cheap today, uranium is not exactly a booming business (then again, I repeat that I know nothing about uranium), or at least it doesn’t seem so, and it hasn’t moved in forever, except down. So why would you invest in this? People hate nuclear energy for some reason and I fail to see what could make the uranium demand tick up. So I’d rate this a sell. Move your money somewhere where it will work for you.
Silver Standard Resources (TSE:SSO)
I have never heard of this company but, again, I would never invest in Silver no matter what (nor gold, for that matter). Yes, this is a producer, but the general idea remains: I hate mining companies, I think they are all worthless, and I hate silver companies.
At $1.75B, this is a generally small player and, again, I fail to see why anyone would invest into that. What’s the point? It’s never going to announce spectacular earnings and it’s never going to rise 100%. In fact, chances are it will keep drifting down forever, so why bother?
I could see an investment in silver as a defensive play, but there are better silver companies out there. If I wanted that kind of investment, I would invest in Silver Wheaton Corp. At least you get a (tiny) dividend while you wait).
Overall, silver companies offer nothing, to me at least: it doesn’t exactly protect you in case of a crash and it can barely ever grow. It’s not like the silver market is hot and even if it was, there are plenty of better silver-producing companies all around the globe.