Chase Your Dream (Prices)

By Roger Conrad • June 8, 2012 • Portfolio Update

It’s all too human to want to chase a rising stock and shun a falling one. The rational part of our brain knows that you’re supposed to buy when prices are low. And it knows too that even the most stalwart winner in your portfolio can get ahead of itself and merit taking some profits.

Unfortunately, when volatility rules the markets it’s all too easy to let emotions win. We saw that play out to the upside earlier this year, as investors chased many of our Conservative Holdings to new heights, well above our value-set buy targets. And we’ve seen the opposite this spring, as many have dumped stocks for no other reason than they’ve given some ground.

Our Aggressive Holdings have been particularly affected by the selling since early May. That’s because their business prospects are leveraged to economic growth, in most cases through exposure to swings in commodity prices.

Over the past few years I’ve systematically reduced Portfolio vulnerability to falling natural gas prices, mainly by moving toward producers of oil and natural gas liquids (NGL). May, however, featured a major slide in oil prices, which took down these stocks as well.

And of course all Canadian stocks have lost ground since late April as the Canadian dollar moved down from roughly USD1.02 to about USD0.97.

As I pointed out in four Flash Alerts in April and May and in the May Portfolio Update, my recommendations are still putting up good operating numbers. All are funding their distributions conservatively–including producers such as ARC Resources Ltd (TSX: ARX, OTC: AETUF), whose stocks have been hit hard.

On the debt side, 21 of the 35 companies represented in the Portfolio have nothing maturing before the end of 2013. That’s about the best possible protection against a potential tightening of credit conditions, should we see Europe’s woes spread to these shores.

The rest have only minimal sums to roll over, virtually all coming up in 2013 and well covered by cash flow and cash on hand–and none of it significant relative to market capitalization.

Throw in the fact that these businesses proved their ability to withstand a full-fledged catastrophe–namely the market crash/credit crunch/recession of 2008-09–and I have no reason to doubt their resilience.

That’s why I plan to hold them all though turmoil that looks suspiciously like a repeat of what hit global stock markets in 2011 and before that in 2010.

There is, however, most definitely a way to play offense in this environment. That’s to set “dream buy” prices on stocks you want to own, by utilizing buy limit orders.

Use of automatic selling tactics such as “trailing stop-losses” has become increasingly popular since the crash of 2008. Fear of getting caught in a reprise of that crisis is perhaps greater than ever. Consequently, all too many investors are willing to place automatic orders to sell their stocks at prices that often guarantee losses in order to avoid the potential for an even larger loss.

I’ve repeatedly advised against this strategy in the past and continue to do so now. For one thing, a stop doesn’t guarantee you’ll be sold out at a set price. It just means that if a certain level is breached, your position will be automatically sold at the first available price where there’s a bid, i.e. an order to buy.

If enough people have stops in roughly the same place–typical for popular stocks where investors have set trailing stops–sells can temporarily overwhelm buys. And the result is sellers can get cashed out well below the point where they intended to sell. If you’re nervous about a stock you’re far better off just selling on your own time.

The strategy I follow in Canadian Edge is to sell when there’s real business weakness, i.e when there are developments with potential to threaten growth and the dividend. If there’s a big down move in a stock I recommend, I’m going to find out why. But I’ll never base a sell on a stock’s movement alone.

Buy limit orders are also automatic. If a certain price is hit on the downside, your account will immediately add shares at that price. But that’s where the similarities end.

Stops always sell you low to protect you from going lower. But buy limit orders are pure and simple attempts to buy stocks low. You may not catch the exact bottom. But so long as the underlying companies you’ve chosen are solid, you’re locking in a substantial return when the markets settle down.

Most Portfolio recommendations already rate strong buys, trading below my buy targets. This certainly applies to High Yield of the Month picks Bird Construction Inc (TSX: BDT, OTC: BIRDF) and IBI Group Inc (TSX: IBG, OTC: IBIBF).

If the selloff that began earlier this spring does continue, however, we’re likely to see even lower prices in coming months. That makes now an ideal time to put buy limit orders on stocks you want to own at “dream prices” that will guarantee fat returns, again so long as the underlying businesses stay healthy.

The lower you set a dream buy price, the less chance you will get executed on the trade. Who wouldn’t want to have another chance to buy Bird Construction at less than USD4, the split-adjusted price where the stock bottomed in early December 2008?

That’s certainly possible if we do get another 2008-09-style debacle. But far more likely would be a return trip to USD10 or less, which is the low hit in late September/early October of last year. A purchase near the price of USD8.25 per share on Oct. 4, 2011, would produce a yield of nearly 9 percent on your purchase, roughly equal to this year’s dividend growth rate.

Below I round up performance and any significant developments for each of the 35 Portfolio companies since they announced their first-quarter 2012 earnings. And I present a suggestion for what a “dream buy price” should be for each.

Note that first-quarter earnings analysis can be accessed from the following links to where it appeared in Flash Alerts and the regular May issue; also included are dates (estimated for most, confirmed for some) for the next set of numbers.

Conservative Holdings

Aggressive Holdings

Note that not all of these stocks trade on the New York Stock Exchange (NYSE), which may make it difficult for some investors to enter buy limit orders on them. If you’re shut out, just trade those that are listed on the NYSE and stick to my buy targets for the rest.

Conservative Holdings

AltaGas Ltd (TSX: ALA, OTC: ATGFF) is every bit a buy for anyone who doesn’t already own it up to USD32. The stock has apparently taken a hit merely for being involved in the energy midstream business and is off about 4.6 percent year to date including dividends, despite the fact that the vast majority of revenue is fee-based.

Since the earnings announcement in April the company has successfully financed the bulk of its ongoing acquisition of gas utility assets in Alaska and Michigan, and it’s received approval for the deal from Michigan regulators as well.

That keeps the purchase on track for a third-quarter 2012 close, at which time cash flow will be even more impervious to the ups and downs of commodity prices and the economy.

All that makes it unlikely we’ll see any real downside in AltaGas shares, but this stock did trade below USD20 for nearly two years from late 2008 through late 2010.

Setting a buy limit order at USD20 would lock in a yield of nearly 7 percent on this very solid company, which would not be a bad catch by any stretch.

AltaGas is a strong buy under USD32.

Artis REIT (TSX: AX-U, OTC: ARESF) is up about 16 percent thus far in 2012 including dividends. But the stock actually touched a low of barely USD10 in early August 2011 and again in early October. Setting a buy limit order at that level would lock in a yield of nearly 11 percent.

Meanwhile, the company continues to increase its value by making high quality acquisitions financed by low cost money. Another CAD122.3 million in deals announced in late May fit that bill and promise more strong growth ahead.

Artis REIT also trades slightly below my buy target of USD16, for those who don’t want to wait on a steep drop that may never happen.

Atlantic Power Corp (TSX: ATP, NYSE: AT) stock is roughly flat year to date including dividends.

The only real development since the earnings announcement last month is the close of the company’s sale of its 14.3 percent stake in Primary Energy Recycling Corp (TSX: PRI, OTC: PENGF) for CAD30.2 million in proceeds. This cash will help the company finance growth in its core areas and limit dependence on credit markets.

The stock isn’t trading too far from its 52-week low of around USD12.52 and is well below my buy target of USD16. Aggressive investors may shoot for a target of around USD10, a level last seen during the May 2010 “Flash Crash” and which would lock in a yield of about 11.2 percent on this exceptionally steady company.

Atlantic Power is a buy under USD16.

Bird Construction Inc’s (TSX: BDT, OTC: BIRDF) prospects are highlighted in High Yield of the Month.

Execution on a buy limit order at USD8.25 would lock in a monster yield, though the stock is definitely a buy up to my target of USD14.50.

Brookfield Renewable Energy Partners LP (TSX: BEP-U, OTC: BRPFF) shares will likely get a lift when its NYSE listing comes through, sometime in the second half of 2012.

Like Atlantic Power, the stock is roughly flat this year. It did hit a low of less than USD20 during the May 2010 Flash Crash and would produce a yield of about 7 percent if purchased at that price.

Other than that, it’s a solid enough buy on a dip to USD27 or lower.

Canadian Apartment Properties REIT (TSX: CAR-U, OTC: CDPYF) has remained stubbornly above my buy target this year.

The REIT is up a little more than 7 percent for 2012 including dividends, with some of that gain coming after the announcement of the purchase of 12 manufactured home communities in four provinces for CAD72.3 million. The transaction expands this aspect of the business to 10.3 percent of the total portfolio and is expected to be immediately accretive to cash flow, bringing the day of dividend growth closer.

The REIT’s last significant low was around USD18 in early August of 2011. That would bring a yield of 6 percent if revisited.

Stick to my target of USD22 or lower.

Cineplex Inc (TSX: CGX, OTC: CPXGF) is up about 15 percent including dividends thus far in 2012, though it’s backed a bit off the high reached in early May.

There’s been no hard news from the company since earnings were announced last month, but the movie lineup continues to suggest another strong quarter ahead. In view of the results and the 4.7 percent dividend increase last month, I’m raising the buy target to USD28.

The lowest level hit by the stock over the past year was around USD22 in early August. A buy limit order at that level would net a yield of around 6 percent.

Otherwise, wait on a dip to USD28 or lower to buy Cineplex.

Davis + Henderson Income Corp (TSX: DH, OTC: DHIFF) is up about 5 percent this year including dividends paid.

There’s nothing really to report here since earnings in early May. But the stock has seen some volatility, likely a reaction to worries the Canadian banks that are its customers could suffer from Europe’s woes. That doesn’t seem likely. Davis + Henderson did, however, dip under USD14 in mid-December 2011, a level that would produce a yield of nearly 9 percent and a stellar buying opportunity.

The stock is a great value up to my target of USD20.

Dundee REIT (TSX: D-U, OTC: DRETF) in May announced its first blockbuster deal since closing the Whiterock REIT deal that made it Canada’s largest office REIT. That’s the purchase of two-thirds of the Scotia Plaza building in Toronto in partnership with H&R REIT (TSX: HR-U, OTC: HRUFF). This sale is expected to close Jun. 20, and Dundee has already arranged low-cost financing for a sizeable chunk of its share.

Not surprisingly, the initial market reaction to the deal was negative, as is generally the case for acquisitions. But the REIT has since rebounded and currently stands almost 19 percent to the positive for the year including dividends.

The current price is a bit above my target of USD36. The low over the last 12 months was less than USD28 on Oct. 4. That’s likely a good level to set a dream buy price, where the stock would yield about 8 percent.

Dundee REIT is a buy on dips below USD36.

EnerCare Inc (TSX: ECI, OTC: CSUWF) is flat for the year, as gains achieved in January unwound in May. The only real development since the earnings announcement is the company’s deployment of a new customer billing system for its submetering operation, which will allow greater economies of scale for that business.

The movement in the stock seems a reaction to the battle for control of the company, in which management narrowly defeated a private capital firm’s slate of directors. Given the wave of insider buys over the past year and recent dividend increase, that shouldn’t concern long-term investors too much.

There may be an opportunity to pick up shares at a lower price, however, as EnerCare has traded near USD6 several times over the past year. The stock at that price would yield north of 11 percent.

EnerCare is a buy up to USD10.

IBI Group Inc (TSX: IBG, OTC: IBIBF) is a High Yield of the Month recommendation for June. The stock trades well below my target of USD15, largely in reaction to a perceived miss of first quarter earnings, and is down -9.6 percent for 2012.

That’s a pretty good price for picking up shares, though some may want to put on a buy limit order around USD10, near the low hit Oct. 4, 2011.

IBI Group is a buy up to USD15.

Innergex Renewable Energy Inc (TSX: INE, OTC: INGXF) is up about 3.6 percent for 2012 and continues to trade above my buy target of USD10.

The major news since first-quarter earnings were announced is the beginning of commercial operations for the Stardale Solar Farm, which will immediately begin adding cash flow under a 20-year contract with the Ontario Power Authority. That’s the kind of invest-to-grow move that will keep this company becoming more valuable over time.

Meanwhile, the stock did trade under USD8.50 in early October, which would be good for a yield of nearly 7 percent.

Innergex Renewable Energy is a buy under USD10.

Just Energy Group Inc (TSX: JE, NYSE: JE) had very strong fiscal fourth-quarter earnings (ended Mar. 31, 2012) and has grown its business since.

But the stock continues to trade as though earnings rise and fall with energy prices, which they don’t.

The stock is up 3.2 percent this year including dividends paid but is well below my buy target of USD16.

Those who want to go lower could put a buy limit order at last year’s low of less than USD9, which would produce a yield of nearly 14 percent.

Just Energy Group is a buy under USD16.

Keyera Corp (TSX: KEY, OTC: KEYUF) has also had nothing to report since announcing earnings in early May. The stock has been flat since but is still down about 13 percent year to-date after the unwinding of a parabolic rise at the end of 2011.

As of this writing, the stock was trading slightly below my buy target of USD42. Shares went as low as USD37.50 in mid-April but sold for less than USD30 until September 2010.

It seems unlikely that a company this steady would revisit that level. But if oil and natural gas liquids prices really should crash, we could get that low, in which case investors would be able to lock in a growing yield of better than 7 percent.

Keyera is a buy under USD42.

Northern Property REIT (TSX: NPR-U, OTC: NPRUF) has had nothing to report since it turned in generally solid earnings and announced a plan to unwind its staple share structure.

Like most high-quality Canadian REITs, Northern continues to command a premium valuation and is up about 11.1 percent year to date. My buy target has been USD30 for some time, a level that was last reached briefly in mid-April. That remains my favored entry point. But the stock did slash below USD25 briefly in early October 2011, at which point it would yield better than 6 percent. That’s a fine dream price for a company of this high quality.

Northern Property is a buy under USD30.

Pembina Pipeline Corp (TSX: PPL, NYSE: PBA) is currently off about 6.9 percent for the year including dividends and trades well below my recently raised buy target of USD30.

The stock’s recent dip seems related to worries that the acquisition of Provident Energy Ltd will increase vulnerability to falling natural gas liquids prices.

hat’s kept shares uncharacteristically volatile this year, despite what appears to be little real risk.

The stock has traded below USD25 per share several times in the past few months. Aggressive investors may want to set a buy limit order in the low USD20s on the off chance that NGLs really plunge from here and the company is indeed as vulnerable as some bears fear.

Pembina Pipeline is a buy under USD30.

RioCan REIT (TSX: REI-U, OTC: RIOCF) is still a bit above my longstanding buy target of USD25, a level it’s continued to hold as a stock many investors believe to be invulnerable. The units are up slightly this year including dividends and have fluctuated in a narrow range, and there have been no major developments since earnings were released in early May.

The lowest point reached in the past 52 weeks was on Aug. 8, 2011, when the stock touched below USD22. That may be a good spot to put a buy limit order, as it would produce a very safe yield of more than 6 percent.

RioCan REIT is a strong buy on dips below USD25.

Shaw Communications Inc (TSX: SJR/B. NYSE: SJR) is off about 2 percent thus far in 2012. The company operates on a slightly different calendar than the rest of the Portfolio and so reported profits for the quarter ended Feb. 29 in early April. It will also be first to report the next time around, with numbers for the period ending May 31 coming out in early July.

Since the last report the company has reported no major business news, other than the Shaw family’s decision to buy more shares. The stock, though, has come down from the low USD20s to the high teens and trades at its lowest level in the past year. That makes now a good time to pick up shares without setting a lower buy limit order.

But aggressive investors may want to set something under USD18 or even USD16, which is the three-year low. Shaw Communications is a buy under USD22.

Student Transportation Inc (TSX: STB, NSDQ: STB) is up about 3 percent for the year including dividends. The company has continued to report the signing of new contracts for its next fiscal year, locking in strong revenue growth.

The stock has generally held a range of between USD6.50 and USD7 this year. Shares did hit below USD5 briefly in early October 2011, a level that would produce an 11 percent plus yield.

But the current price is cheap enough and below my buy target of USD7.

TransForce Inc (TSX: TFI, OTC: TFIFF) has been the best performer of major Canadian stocks this year, scoring a return of better than 37 percent. The stock also trades above my target of USD17.

There’s been no news on the company since earnings were announced in late April, other than management’s bid to buy back and retire a sizeable chunk of two convertible bond issues. Nor has there been much movement in the stock from a trading range of USD17 to USD18, which it’s held since early February.

It is worth noting, however, that the stock actually traded for less than USD10 in early October of last year. That looks like a good price to swing for the fences with a buy limit order. The worst you’ll do is not get executed. The best is you’ll pick up one of the most dynamic companies in Canada at a ridiculously low price.

TransForce is a strong buy on dips below USD17.

Aggressive Holdings

Acadian Timber Corp (TSX: ADN, OTC: ACAZF) is actually up about 11.5 percent this year, despite widespread fears of an economic debacle. There’s been nothing to report on this company since it released a fairly defensive set of financials. And in fact this stock has been basically flat since spiking up early January.

Acadian has traded below my buy target of USD13 for some time. It’s hard to see a move much below that which didn’t involve a dividend cut, in which case it would be time to reevaluate a position in this stock. Given the support of Brookfield Asset Management Inc (TSX: BAM/A, NYSE: BAM), it might be worth taking a flyer if the stock really did revisit the USD6 range it sank to briefly in autumn 2010.

But if there is a deterioration of finances, I’ll probably be more inclined to move elsewhere rather than try to catch a falling knife.

Acadian Timber is a buy below USD13.

Ag Growth International Inc (TSX: AFN, OTC: AGGZF) has easily been one of our most volatile picks this year, though it’s down less than 6 percent on the year.

The company reported solid first-quarter results along with favorable guidance in mid-May but since then has traded in line with worries about the global economy and the potential impact on grain demand.

Ironically, slower economic growth could well have a salutary effect on Ag Growth’s earnings later this year by bringing down the price of steel needed to make its equipment.

In any case, the low to mid USD30s is far enough below my buy target of USD45 to be a “dream price.” Those who want to go for it could set a buy limit order below USD30, the late 2011 low, or even under USD15, the 2008 bear market low. But USD30 will have a far greater chance of being executed.

Ag Growth rates a buy under USD45.

ARC Resources Ltd (TSX: ARX, OTC: AETUF) demonstrated its ability to weather low natural gas prices in the first quarter. But the recent toppling of oil in May has sent it back under USD20, leaving the stock down about 18 percent for 2012 thus far.

It’s clearly all about energy prices here. And barring a monster future decline, the current price is a steal, well below my buy target of USD26. Those looking for a moon-shot could go for the 2008 bear market low of sub USD9. But keep in mind that was set with oil at barely USD30 a barrel, a point more than USD50 below the current level.

ARC Resources is a buy under USD26.

Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF) management has long maintained its current dividend level is protected against even the worst external environments. And it’s proven that beyond the shadow of a doubt the past five years, including 2008 when it held the dividend level throughout the crisis.

That likely explains why the stock has returned roughly 7 percent this year and held above my buy target of USD15.50 for so long, despite operating in a volatile and economically sensitive industry.

The stock is now below target and a sensible buy limit order could be placed at less than USD11, a level breached briefly in early October 2011.

Chemtrade Logistics is a buy under USD15.50.

Colabor Group Inc (TSX: GCL, OTC: COLFF) is down 22.9 percent year to date including dividends. That’s not surprising, considering the company cut its dividend 33.1 percent earlier this year. I review the company in more detail in this month’s Dividend Watch List.

I don’t believe the stock will sink much below the current level unless there’s real additional deterioration of the underlying business. In that case I really don’t want to be in the stock. The 2008-09 bear market low was actually less than USD5. But I don’t advise setting any buy limit orders at this time.

Colabor Group currently rates a hold.

Crescent Point Energy Corp (TSX: CPG, OTC: CSCTF) has taken a hit from the drop in oil and NGL prices, which comprise 91 percent of its total energy output and substantially all of its cash flow. The stock is down about 7 percent for the year including dividends paid, after being well up for much of the year.

Forgotten is the fact that this company managed to maintain its current dividend rate throughout 2008, as oil fell from over USD150 a barrel to less than USD30. And Crescent converted to a corporation in 2009 while maintaining the current rate as well. Moreover, the company today is much stronger and able to weather ups and downs than it was in 2008 or 2009.

There’s been no news since it reported robust earnings and output growth in early May. But the stock looks like a great buy here below my buy target of USD48.

True, it traded below USD20 for much of 2008, but again that was with oil more than USD50 below its current price.

You may be waiting a long time for that to happen again, unless there’s a stock split.

Crescent Point Energy is a strong buy under USD48.

Extendicare REIT (TSX: EXE-U, OTC: EXETF) will convert to a corporation on Jul. 1 while preserving its current dividend. The company was already paying Canada’s SIFT (specified investment flow-through) tax, which is actually higher than the corporate tax rate. But this move does demonstrate management’s ability to deal with adverse conditions.

I highlight the company’s prospects in Dividend Watch List and have upgraded the stock to a buy up to USD9. The stock is basically flat for this year but did trade briefly below USD6 on Oct. 4, 2011, and that might make a good entry point for a buy limit order.

On the other hand, a steep decline could also signal deteriorating business conditions, so caution is called for here. Don’t just set a buy limit order for Extendicare and forget about it.

Extendicare is a buy under USD9.

Newalta Corp (TSX: NAL, OTC: NWLTF) depends on heavy industry and the energy patch for its business, making its shares are volatile when concerns about the global economy are running high.

The stock is still up by better than 11 percent this year and has held firm around USD14 for most of the spring. That’s in line with the general lack of news since the May 9 earnings report, though surprising in view of the commodity price sensitivity of its business.

This was a far different company the last time it traded far below its current level, so it’s tough to set a buy limit order intelligently at a dream price. USD10, however, was hit twice last year, so that might be a good point to set one for this resilient company.

Newalta is a buy under USD15.

Noranda Income Fund (TSX: NIF-U, OTC: NNDIF) is off about 13 percent for the year after taking a spill this month. There’s been no announcement to trigger such a decline, though the company does face a couple of issues, one concerning an independent review of its dividend.

Until we get a read on what’s causing this volatility, my buy target remains USD6 for those who don’t already own the stock. Given the yield of over 10 percent, however, we’re already at a dream buy price. And anyone who buys in should be ready to exit if need be.

Noranda is a buy under USD6.

Parkland Fuel Corp (TSX: PKI, OTC: PKIUF) is up about 12 percent for 2012 including dividends paid.

The stock rallied hard from a low of less than USD8 per share on Oct. 4, 2011, and continues to trade above my buy target of USD13. My feeling at the October low was that investors were severely over-estimating the risk to the company’s business, and that’s been borne out by results since.

I’m equally bullish on management’s five-year plan, announced after the release of strong first quarter results. That calls for doubling cash flow by 2014 with three initiatives whose success or failure is well within Parkland’s control.

If it succeeds, we’ll see a return to dividend growth in the not-too-distant future. That being said, investors should be patient when buying more Parkland.

A dream buy price would be on a return to trip to USD8, though USD12 looks like a much better bet.

Parkland Fuel is a buy under USD13.

Pengrowth Energy Corp (TSX: PGF, NYSE: PGH) is off about 27 percent year to date including dividends and down roughly 17 percent since I added the stock to the Portfolio in April.

All the operating news from the company has been positive, including strong first-quarter profits and the close of its merger with the former NAL Energy Corp. But that’s not been nearly enough to counter worries about falling oil prices.

The good news is this company still has plenty of room to boost output and profit with the NAL assets as well as cut costs. That should keep the dividend solid, barring another sharp drop in oil prices.

The stock isn’t quite as cheap as it was back in March 2009, or on May 6, 2010 when it briefly hit a low of USD4.19 before closing above USD10 where it began the day. Energy stocks are volatile by nature, so we could see those levels hit again. Barring a drop to USD50 oil or lower, however, we’re likely to look back at this level for Pengrowth as a dream price.

My buy-under target for Pengrowth remains USD10.

PetroBakken Energy Ltd (TSX: PBN, OTC: PBKEF) was also added to the Aggressive Holdings in early April and since then has reported strong first-quarter earnings. The stock, however, is off about 27 percent since my recommendation, though only about 3 percent for the year.

In retrospect, my timing on this stock was truly poor, coming only weeks before oil went into its recent swoon. The company, however, is squarely on track for robust growth in light-oil production for the first time in its brief history. And that’s ultimately going to prove a lot more important for its ability to build wealth than near-term ups and downs for oil prices.

As with Pengrowth, my view is the current price is something of a dream level for such a promising company. The stock did trade as low as USD6 in early October, though that drop was due to production problems that have now been fixed.

PetroBakken Energy is a buy up to USD18.

Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF) posted first-quarter 2012 results that settled any doubts I had about its ability to weather a bad market for natural gas. The stock still sits at a 26 percent loss for the year, but that’s largely the result of unwinding a parabolic gain from the end of 2011.

The stock hasn’t been much below its current level since early 2010, though it did hit a low of less than USD5 in March 2009. I have severe doubts that it would reach that level again, but in energy anything is possible.

For those who want to buy and lock away value now, Peyto is a buy up to my target of USD20.

PHX Energy Services Corp (TSX: PHX, OTC: PHXHF) is a bit less underwater this year with a loss of 13 percent. But the stock has declined sharply from the early March high of nearly USD12, hit immediately following the company’s 50 percent dividend boost.

The current yield of nearly 8 percent is a pretty clear sign many investors are skeptical the energy services firm’s good fortune can continue if oil prices continue to decline sharply. But if the numbers are any guide we’re a long way from where lower prices will really hurt this company’s earnings, which thanks to budding international expansion aren’t nearly as dependent on North America as the consensus seems to believe.

This stock has been volatile in the past, and we could certainly see a drop to USD7 or even the bear market low of USD5 if fears about oil are stirred enough. On the other hand, it’s far more likely we’ll see these shares revisit their 2011 highs in the mid-teens, making the current price level a short-lived dream.

My buy target remains USD14, but USD7 looks like a good point to take a longshot bet on a short-lived price dip.

Vermilion Energy Inc (TSX: VET, OTC: VEMTF) hasn’t wholly escaped investor anxiety about oil and gas prices and is off about 2 percent after being up for most of the year.

It’s all systems go for this company, which sells the bulk of its energy in Europe and Australia, where prices are far higher than in North America. And the stock now trades well below my target of USD50, presenting a solid opportunity for purchases.

The stock has held at least the USD40 level since late 2010, and the 2008 low was only slightly below USD22. My view is a breakdown even under USD30 is unlikely, unless the fear level really gets out of control in the energy market. That may be worth taking a shot on now. But no one should be too disappointed if they’re not executed at that price.

Vermilion is a buy under USD50.

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Gerald Pollack

Gerald Pollack

Thank you! I like the information aboout limit orders. I always use a limit order. I have a question which is: I own 500 just energy which I bot at $11.43. It is selling for 8.43 approx, now. If I bot another 500 would that be considered doubling down? In other words is it still a good buy to add more shares. Gerald

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