Long-Term Investors: 2 Western Canadian Companies to Grow and Protect Your Capital

Finding companies to invest in that have the same long-term values as you is one of the best ways to ensure success when investing.

If you are someone who is investing for the long-term and not really bothered by quarterly results all that much, you don’t want to be invested in a company that may sacrifice future growth to hit quarterly targets.

You want to find companies that are making the best decisions to impact shareholders long term, decisions that will protect your capital as best as possible while creating the optimal opportunities to grow it.

Two companies with strong management and values that are best aligned with long-term shareholders are Enbridge Inc (TSX:ENB)(NYSE:ENB) and Peyto Exploration and Development Corp (TSX:PEY).

Enbridge

Enbridge is a massive company operating on a global scale. It operates in four main segments: liquids pipelines, gas distribution, gas transmission and midstream, and renewable power generation and transmission.

In North America the company makes up a major portion of our economy. Enbridge transports roughly 25% of North America’s crude oil and 22% of its natural gas.

Transporting nearly a quarter of North America’s energy clearly makes Enbridge a crucial part of the North American economy.

The company operates in businesses that are necessities but even still, roughly 98% of its earnings before interest, taxes, depreciation and amortization (EBITDA) is regulated, giving it predictable and reliable cash flow.

On top of that, 93% of its counterparty credit exposure is from investment-grade clients, which is reassuring and mitigates a ton of risk.

Another reason why Enbridge is the perfect long-term hold is its strong financial stability.

It’s been strengthening the balance sheet by making some non-core asset divestments, to free up capital. Since August 2018, it’s freed up nearly $8 billion in capital.

This has helped it to strengthen its leverage ratios, decreasing its debt to EBITDA the last few years into its target range of 4.5 to 5.0 times.

The strong financials coupled with its defensive business model and predictable cash flows lead it to pay an attractive dividend that is raised often as it grows its distributable cash flow.

The dividend yields roughly 5.8% and its lengthy history of dividend increases have led Enbridge to be included in the Canadian Dividend Aristocrats list.

It’s one of the largest companies in Canada and one of the best operators, so buying today for the long-term will almost surely yield you great results.

Peyto

Peyto is a natural gas producer that in my opinion is one of the best-run companies in the Canadian energy industry and one that has a returns-focused investment strategy.

Over the last 20 years, Peyto has averaged a roughly 16% return on capital employed and 29% return on equity. These numbers are incredible and some of the highest in the industry.

It’s achieved these massive returns in large part because it’s one of the lowest cost producers in Western Canada. In 2018, its cash costs per barrel of oil equivalent was just $5.51.

Since the business is run to maximize the return on investors capital, Peyto has been reducing its production in the last few years, as natural gas prices have been depressed.

It believes this is a prudent choice, not wanting to sell its assets at these relatively low prices.

This has led to the stock being sold off severely, and even with a few dividend cuts to keep the dividend in line with the earnings it’s generating, it still yields a solid 8.5% today.

Natural gas prices have to rebound eventually, and Peyto has positioned itself the best it can to ramp its production back up when this happens.

It’s creating a ton of potential for investors and given how cheap it is today, investors willing to be patient are in for some massive rewards down the line.

Bottom line

Both companies continue to make prudent long-term choices that are intended to benefit long-term investors the most. The companies operate to set investors up with huge growth down the line, but also pay highly-attractive dividends in the meantime.

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Fool contributor Daniel Da Costa owns shares of PEYTO EXPLORATION AND DVLPMNT CORP. The Motley Fool owns shares of and recommends Enbridge.

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What Pot Stock Buyers Need to Know About This Cannabis 2.0 Portfolio

By far, the most prominent of the Canadian cannabis stocks, Canopy Growth Corp (TSX:WEED)(NYSE:CGC), has exceeded the market in investment. The company has even attracted big-name Hollywood actors like Pineapple Express star Seth Rogen and Snoop Dog. Famous partners are sure to continue boosting the stock price, which is good news for shareholders.

In November, Canopy Growth announced a new partnership with Canadian rap musician Drake, who will purchase a 60% ownership stake in More Life Growth Co., a Toronto-based licensed subsidiary of Canopy Growth. Canopy Growth will still own 40% of the company.

Cannabis 2.0 product lineup adds to the excitement

On Thursday, Canopy Growth unveiled its Cannabis 2.0 product lineup at a Toronto media event. One of the most exciting products to view at the event was a cannabis-infused beverage sold under Seth Rogen’s brand, Houseplant. Consumers can choose between two flavours: lemon and grapefruit. For investors drawn in more by their sweet tooth, Canopy Growth also displayed a line of scrumptious chocolate edibles, including a Tweed brand containing 1.8 mg of CBD and 2.5 mg of THC.

The mix between higher concentrations of CBD to THC should be a big seller among more health-conscious consumers. CBD balances the psychoactive effects of THC to produce safer, less destructive highs. A common criticism of today’s marijuana is the higher concentration of THC differentiating it from the cannabis smoked 30-years ago. CBD-focused products realign the legalization mission with healthy living.

Cannabis 2.0 has been the long-awaited legalization and approval for edibles, beverages, and vape products containing CBD and THC. Canopy Growth CEO Mark Zekulin commented, “Since our first medical sale in 2014, we’ve focused on innovation and quality, and now we’re expanding that with the launch of our game-changing recreational beverages, chocolates, and vapes.”

Health concerns may rain on the parade, however. Vaping has gotten some negative press lately and has even been banned outright in Quebec after some users died from severe lung damage. Some of the substances in the products, including Vitamin E, can be extremely harmful to consumers, particularly when heated at higher temperatures.

Luckily, Canopy Growth diversified its cannabis 2.0 portfolio beyond vaping products, and into digestible goods. Strategic portfolio balancing will undoubtedly help the company going into earnings in the next few quarters because its revenue will be less dependent on high-margin vaping products.

Foolish takeaway

Cannabis investors do need to be aware of risks if planning on increasing their positions in Canopy Growth. The share price on the stock may seem to be stabilizing after a steep drop in the value of 42.22%, but don’t be deceived; Canopy Growth stock is still too risky to buy at the current share price of $24.47.

Speculators and day traders drove the price of Canopy Growth stock up to obscene levels in 2018. By May 2019, the stock was just below $66 per share.

The stock had some good things going for it in that it maintained a reasonable number of shares outstanding. Unfortunately, to maintain the funding necessary to finance acquisitions and fast growth in the race for market share, Canopy Growth took out more debt to compensate for fewer dilutive equity offerings.

Looking at the negative $1.22 billion in levered free cash flow, shareholders will have to wait quite a while to share profits with debt holders. Marijuana investors should no doubt stay informed on the business development moves at Canopy Growth, including the company’s marijuana 2.0 portfolio – with the understanding that the stock has still not reached a bottom.

Fool contributor Debra Ray has no position in any of the stocks mentioned.

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3 Key Metrics Suggest Bitcoin Price Has Completed Its Macro Bear Cycle

Whilst the Bitcoin price (BTC) action may seem bearish to some, the leading digital asset has several bullish indicators that hint towards an imminent recovery.

As Bitcoin enters the last month of 2019, will the king of cryptocurrencies finish on a bullish rally, or fall to a yearly low?

Daily crypto market performance. Source: Coin360.com

The daily chart turns bullish

BTC USD daily chart. Source: TradingView

Since the beginning of November, the daily chart has been bearish. Multiple attempts were made to break $9,500, but this failed to materialize and what came next was three and a half weeks of pain as Bitcoin plummeted to around $6,500 on Nov. 25.

The good news is that Bitcoin seemed to bounce off its new floor and quickly gained over $1,300 from it’s low, changing the trend on the daily chart from bearish to bullish.

Using the Bollinger Bands (BB) Indicator, it seems the next milestone to break will be the moving average which currently lies at $8,000. From here Bitcoin will have a shot at the low $9,000 range.

Before reaching this conclusion, let’s see if there are any other indicators that share the bullish bias?

The MACD also looks bullish on the daily timeframe

BTC USD MACD daily chart. Source: TradingView

The Moving Average Divergence Convergence (MACD) indicator shows that Bitcoin seems to be on target for a bullish cross when the daily candle closes.

This will result in the first green candle to be printed on the MACD histogram, and history shows that this results in a reversal period, how long that period will last is difficult to answer, but it’s a buying signal to traders nonetheless.

Fortunately, there is even more good news.

CME gap closed high

BITCOIN CME futures daily chart. Source: TradingView

The Bitcoin CME gap has become quite the tradable event lately, however, in recent weeks, the gap has been below the weekly open but this is not the case this forthcoming week.

On Nov.29 the CME market closed at $7,800 and at the time of writing, Bitcoin is currently trading at $7,300. This means that should the CME gap-fill next week, Bitcoin will experience a 7% price increase.

Whilst this is not a guaranteed outcome, it has become a very reliable metric unique to the digital asset of late, and such a boost in addition to the other bullish indicators, would be welcomed by the bulls.

The weekly RSI remains oversold

BTC USD RSI daily chart. Source: TradingView

The last bullish indicator on the daily chart that I want to look at is the Relative Strength Index Indicator (RSI). Over the last week of November, the RSI was showing that BTC/USD was heavily oversold. The lowest point read 17.65 on Nov. 25 and even though the RSI is currently pointing downwards, it’s showing a reading in the mid-30s. As the RSI approaches 30, it sends a buying signal that an asset is oversold to traders.

It isn’t often that traders get so many tangible bullish signs lining up like this so could this be the beginning of the next Bitcoin parabola? Or is there something we’re not seeing?

The weekly chart

BTC USD weekly chart. Source: TradingView

The weekly Bitcoin chart shows that the support on the Bolinger Bands indicator has been broken twice in as many weeks. Bears could take this as a sign that the price is about to fall through the floor or bulls could interpret it as the price holding its ground before a reversal.

The weekly MACD is still bearish

BTC USD MACD weekly chart. Source: TradingView

There’s no denying that the MACD looks bearish on the weekly chart. Both the Signal and the MACD line are pointing down. This would normally indicate that things are not looking too rosy for Bitcoin, however, traders must also consider that the MACD is not showing any of the positives from the past week that is evident on the lower time frames.

As such, when the weekly candle closes, the MACD should paint a very different picture, a picture that shows the bleeding is coming to an end. This coupled with the week ahead means that traders could see a 7% increase if the CME gap is filled and the MACD could even cross bullish by Dec. 9.

The weekly RSI also looks oversold

BTC USD RSI weekly chart. Source: TradingView

Lastly, traders must also analyze the RSI on the weekly timeframe. Whilst it may not look confidence-inspiring at first glance, there are positives that can be observed in this timeframe.

Currently, the RSI is leaning towards being oversold with a reading near 38.05. Typically, readings around 30 are considered a buying signal to traders and I view the weekly RSI as a positive indicator.

If the RSI had been reading 50-70 then traders might have decided against buying Bitcoin this coming week as this would have been a signal to hold off for a little longer. However, the lines analyzed today all suggest that the bleeding has come to a temporary slowdown and that the week ahead isn’t terribly bleak.

BTC USD monthly chart. Source: TradingView

Bearish scenario

Despite the bullish outlook provided by this analysis, Bitcoin’s price is still sitting slightly above the moving average of the Bollinger Bands on the monthly chart. However, this will be the 4th consecutive month that it has tested this level. Should the price fail to hold above $6,900, this could open up a new path down to $2,750.

Bullish scenario

With a pending bullish MACD cross and the possible CME gap-fill to $7,800 this week, traders could look for Bitcoin to hold $7,800 as a new level of support. This could open up $9,050 as the next key level of resistance over the coming week.

The views and opinions expressed here are solely those of the @officiallykeith and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Silver Technical Strategy: Risk Less, Trade More

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Silver Technical Analysis: Risk Less, Trade More

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Silver Technical Analysis: Risk Less, Trade More Strategy

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This Oil Stock Is on Sale: Buy Today to Profit From Higher Oil in 2020

Oil has rallied strongly since the start of October to see the international Brent benchmark up by 26% to be trading at over US$63 per barrel. This has been a boon for energy stocks, but many Canadian names have failed to rally or have rallied less strongly than crude. One driller that appears very attractively valued and will deliver considerable value as oil rises during 2020 is Parex Resources (TSX:PXT). The company has only gained 19% since the start of 2019, despite Brent gaining 26%, indicating that Parex is attractively valued and has further to rally, making now the time to buy.

High-quality oil assets

An attractive aspect of Parex’s operations is its high-quality oil assets comprised of 2.3 million acres over 23 blocks in the South American nation of Colombia, containing proven and probable oil reserves of 185 million barrels. Those petroleum concessions are in Colombia’s Magdalena and Llanos Basins.

This allows Parex to access Brent pricing, which, because it trades at a premium to the North American West Texas Benchmark, gives it a financial advantage over its peers operating solely in North America. That combined with low operating expenses sees Parex reporting a solid netback, even in the current harsh environment dominated by weaker oil, of US$37.90 per barrel for the first nine months of 2019. This is significantly higher than the netbacks of upstream oil producers operating solely in Canada, underscoring Parex’s profitability.

What makes Parex even more attractive is that it is trading at a deep 68% discount to its net asset value (NAV) of $34 per share, highlighting the considerable upside available. As crude rises, the value of Parex’s oil reserves, and hence its NAV, will expand, creating additional upside for shareholders. The driller has also been actively growing its oil reserves through exploration and well development drilling. That should see Parex’s reserves, which have a 29% compound annual growth rate (CAGR) between 2014 and 2018, continue to expand further, bolstering its NAV and the potential upside available to investors.

A very appealing aspect of Parex is its rock-solid balance sheet. It ended the third quarter 2019, with US$350 million in cash, no long-term debt and total liabilities of slightly less than US$275 million. That endows Parex with considerable financial flexibility to continue its exploration and development program as well as weather another oil price collapse.

The company also has a proven history of growing production, placing it to take full advantage of higher oil. For the first nine months of 2019, Parex’s oil output grew by 22% year over year to 52,173 barrels, which was 98% weighted to crude.

The driller has thus far been able to avoid many of the security issues that have been impacting other energy companies operating in Colombia. That can be attributed to it operating in the Andean nation’s most mature oil basins, where the industry is generally accepted by most local communities and seen as an important regional employer.

Foolish takeaway

Parex is an extremely attractively valued play on higher oil. Not only will its earnings grow as its production and the value of crude increase, but Parex is trading at a deep discount to its after-tax NAV, indicating that there is considerable upside ahead as confidence returns to energy markets. For these reasons, now is the time to boost your exposure to oil by acquiring Parex.

Fool contributor Matt Smith has no position in any of the stocks mentioned.

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