Scott Willis, head of research at Grizzle
Focus: Energy, resource and marijuana stocks

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MARKET OUTLOOK

After OPEC and Russia agreed to begin opening the taps on the oil barrels they’ve been holding back, we think a line in the sand has been drawn at $80 per barrel. Oil bulls point to strong demand and supply losses from Venezuela and Iran as a reason for another price spike, but when we look at oil markets in 2018 compared to 2008, they look very different.

U.S. shale has come roaring back (up 1.6 million barrels per day year-over-year in June) and OPEC + Russia have at least three million barrels of spare capacity: more than enough to blunt the impact of lost barrels from politically risky countries. We think investors should prepare for a range-bound market.

TOP PICKS

PEMBINA PIPELINE (PPL.TO)
Most recent purchase at $34.52 on June 28.

Pembina is a natural gas and liquids pipeline company in western Canada. We like it because, unlike most pipeline players, it isn’t running out of projects to fund; it has more than enough. Pembina is funding growth without issuing equity unlike peers, which means less dilution. It has over 5 per cent yield and a dividend growing at 9 per cent. Get paid to wait for stock performance: our preferred way to play range-bound oil prices. There’s a medium-term equity kicker if LNG projects move ahead on the west coast or if they build a plant to turn cheap natural gas into plastics. You get paid to own this stock and have good upside for a low-risk pipeline player.

GOLAR LNG (GLNG.O)
Most recent purchase at $29.14 on June 28.

This is a stock we like as a play on tighter LNG markets going into year-end. Spot LNG prices are up strongly this year due to higher-than-expected demand from Asia (especially from China, which is weaning itself off of coal power plants). Golar is also a long-term play on the switch from coal to gas for power generation and transportation. The LNG market is much firmer than expected this time of the year. We still have winter to go; that’s when demand picks up and prices could go even higher.

TOTAL SA (TOT.N)
Most recent purchase at $60.37 on June 28.

Total is a way to play the theme of structurally robust gas demand growth from emerging markets and electric vehicle adoption. They’re a top 3 player in LNG and will be a direct beneficiary as gas demand continues to grow. Total is more profitable and growing faster than its peers. Plus, it has a 5 per cent dividend yield. By owning Total, you get paid to wait until the next downturn in oil or, if oil spikes, they generate 14 per cent more cash flow for every $10 increase in the crude price.

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