Dennis da Silva, Senior Portfolio Manager and Managing Director at Middlefield Capital Corporation

FOCUS: Canadian Resource Stocks

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MARKET OUTLOOK:


We have seen several bottoms determined across the commodity spectrum in 2016. Oil and gold have had material rebounds from multi-year lows which has fueled corresponding moves in equities. Speculation appears to have driven oil higher than what fundamentals would suggest at this time. We believe that growing oil demand and a declining non-OPEC supply will lead to a balanced market into 2017. We remain focused in low cost/higher margin companies with strong balance sheet to capitalize to opportunities through this trough in commodity prices.

Top Picks:

Torc Oil & Gas (TOG.TO)

Management team has a conservative, under promise approach. Spending cash flow in the first half of the year so they can adjust if oil stays under US$45/bbl. Premium oil dividend company that is trading in line with historical valuation. Key drivers are oil asset quality, efficiencies and low declines. CPP provides financial lever for M&A. Offers unhedged leverage to oil with a strong balance sheet.

Seven Generations (VII.TO)

Highest growth Montney gas intermediate with condensate for oil leverage. Cheaper than peers despite track record and growth outlook. Ongoing well production and efficiency improvements while still growing 80 percent per share in 2016. Drilling to fill 2 major new plants (250mmcfd each) by Q3/16 with increasing takeaway capacity through to 2018. Hedged 45 percent at $4.

Tahoe Resources (THO.TO)

Company offers exposure to both gold and silver. Unique combination of multi-asset, low cost/high margin production (<$1,000/oz), fully funded organic growth (35 percent by 2020), significant FCF generation, and a strong balance sheet. The Lakeshore acquisition has diversified the company’s geopolitical risk (50 percent Guatemala, 25 percent Peru/Canada) and provides near-term production combined with long-term optionality.

Disclosure Personal Family Fund/Portfolio
TOG  N  N  Y 
VII  N  N  Y 
THO  N  N  Y 

 

Past Picks:   March 3, 2015

Kelt Exploration (KEL.TO)

  • Then: $8.22
  • Now: $4.78
  • Return: -41.85%
  • TR: -41.85%

Cardinal Energy (CJ.TO)

  • Then: $14.62
  • Now: $10.13
  • Return: -30.71%
  • TR: -24.74%

Lake Shore Gold (LSG.TO)

  • Then: $1.12
  • Now: $2.09
  • Return: +86.61%
  • TR: +86.61%

Total Return Average: +6.67%

 

Disclosure Personal Family Fund/Portfolio
KEL N N Y
CJ N N Y
LSG N N Y

Website: www.middlefield.com