Barrick Gold (T.ABX), Canadian Natural Resources (T.CNQ) named on Barron’s top 10 list for 2014

Stockhouse Editorial
1 Comment| December 10, 2013


The following is an excerpt from Canaccord Genuity’s Morning Coffee newsletter

Over the weekend, Barron’s unveiled its 10 favourite stock picks for 2014, which include: General Motors Co. (NYSE: GMStock Forum), Citigroup Inc. (NYSE: C, Stock Forum), Nestle SA (OTO: NSRGY, Stock Forum, lntel Corp. (NASDAQ: INTC, Stock Forum), Deere and Co. (NYSE: DE, Stock Forum), MetLife Inc. (NYSE: MET, Stock Forum), U.S. Airways (NASDAQ: AAL, Stock Forum), Barrick Gold Corp. (TSX: T.ABX, Stock Forum), Simon Property Group Inc. (NYSE: SPG, Stock Forum) and Canadian Natural Resources Ltd. (TSX: T.CNQ, Stock Forum).

Barron’s 2013 picks gained an average of 35.2%.

Barron’s says CNQ has, “one of the best production outlooks among North American energy outfits and could gush free cash flow after it completes an expansion of its oil-sands facility, scheduled for 2017. Its shares, now trading at US$32, have risen just 5% in 2013, mostly because the company is getting a deeply discounted price for its Canadian heavy crude, which accounts for about 40% of its output.”

CNQ has been the name that Canaccord Genuity Energy Analyst Phil Skolnick has been most positive on, the company is cheapest amongst the senior E&P/Integrateds in his coverage universe.

With a clear line of site on infrastructure improvements in less than a year’s time owing to increased coker, pipeline, and rail capacity, Skolnick believes CNQ will be the go-to stock , given that roughly 40% of its production is heavy oil and it lacks downstream operations, which would act as a partial offset.

Additionally, it is essentially a household name for non-Canadian investors (the incremental buyer) on this theme given its market cap and liquidity. CNQ has also recently changed its tune with respect to acquisitions. In the past, management would highlight that free cash flow would be used to make acquisitions, which would in turn create an overhang on the stock.

Today, when asked, management stated it has no need to do any acquisitions given there are no gaps in the asset base, thus giving investors greater hope for further dividend increases.

In November, CNQ unexpectedly increased its quarterly dividend by 60% to $0.20 per common share from $0.125 per common share – 2.3% yield.

With respect to ABX, Barron’s highlights the company now trades below where it did a decade ago when gold was well below US$400 an ounce, and says it wouldn’t be surprising to see an activist try to mine gold from Barrick next year.

Caveat Emptor: With any top ideas list for the coming year, investors are usually wiser to buy a basket than cherry-pick ideas.


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Bunge
Got killed on ABX as I'm sure many have. Barrick has not been well managed for years IMHO. Glad to read this though.
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December 10, 2013
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