воскресенье, 1 декабря 2019 г.
This Oil Stock Is on Sale: Buy Today to Profit From Higher Oil in 2020
Timor Invest
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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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Use This Top Growth Stock to Turn Your $6,000 TFSA Contribution Into $100,000
Timor Invest
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Tax-Free Savings Accounts (TFSAs) are growing in popularity, as Canadians become increasingly aware of their tax-sheltered status, which can accelerate the pace at which wealth is created and investment goals are achieved. One of the easiest ways to take full advantage of a TFSA and the fact that all capital gains and dividends are tax-free for the life of the investment is to hold quality dividend-paying stocks with solid growth prospects. By doing this, you can avoid a serious error that nearly half of all account holders are making with their TFSAs — that is, using them to hold cash and GICs.
A quality buy-and-hold stock with strong growth prospects is Parkland Fuel (TSX:PKI), which has gained a notable 33% since the start of 2019 and is primed to rally further going into 2020. Through a series of accretive and transformative acquisitions, Parkland has become the largest independent fuel distributor in Canada and the Caribbean.
Strong earnings growth
The company’s earnings have grown at a solid clip. For the third quarter 2019, adjusted gross profit shot up by a notable 46% year over year, adjusted EBITDA went up by a whopping 51%, and distributable cash flow was up by just over 3%. As we enter 2020, Parkland’s earnings will keep growing at a steady clip. It expects to unlock up to $180 million in synergies from earlier transactions by the end of 2020, thereby boosting EBITDA.
Parkland has agreed to acquire Montana-based fuels and lubricants distributor Mort Distributing. The deal, on completion, which is expected by the end of 2020, will boost Parkland’s U.S. presence, positioning it to benefit from a stronger U.S. economy and more positive outlook because of October’s interest rate cut.
While Parkland is a growth stock, it possesses some credible defensive characteristics, including a wide economic moat, which helps to protect its earnings. The relatively inelastic demand for fuels and other petroleum-based products, including lubricants, also helps to make it resistant to economic downturns and market corrections.
While shareholders wait for the company’s market value to appreciate, they will be rewarded by its regular, sustainable dividend, yielding 2.5%. The company offers a dividend-reinvestment plan (DRIP), which not only allows shareholders to use Parkland’s dividend payments to acquire additional shares at no extra cost, but they receive a 5% discount on all stock issued through the facility. This creates a considerable incentive to use the DRIP to unlock the power of compounding and build wealth sooner.
It is these factors, combined with Parkland’s extremely low volatility, as evident from its beat of 0.47, that make it the ideal buy and hold stock for TFSAs. This becomes evident when it is considered that Parkland has delivered an outstanding annualized return of 21% over the last 10 years had dividends been reinvested compared to 17% if they were taken as cash.
Foolish takeaway
While past returns are no guarantee of future performance, Parkland’s strong growth prospects and sustainable dividend make it likely that it will continue to deliver a similar performance over the long term. If you invested your $6,000 2019 TFSA contribution in Parkland stock, added $6,000 annually, and reinvested the dividends through the company’s DRIP, you could accumulate $100,000 in fewer than seven years. That highlights how buying a quality growth stock, utilizing the power of compounding, and holding it in a tax-sheltered TFSA can accelerate the speed at which wealth is created.
This tiny TSX stock could be the next Shopify
One little-known Canadian IPO has doubled in value in a matter of months, and renowned Canadian stock picker Iain Butler sees a potential millionaire-maker in waiting…
Because he thinks this fast-growing company looks a lot like Shopify, a stock Iain officially recommended 3 years ago – before it skyrocketed by 1,211%!
Iain and his team just published a detailed report on this tiny TSX stock. Find out how you can access the NEXT Shopify today!
Fool contributor Matt Smith has no position in any of the stocks mentioned.
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Microsoft to Turn 1980s Gamebook Series Into Blockchain Card Game
Timor Invest
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Microsoft, major game developer Eidos and gamebook firm Fabled Lands are jointly developing a blockchain card game based on a 1980s best-selling gamebook.
According to a press release published on Dec. 1, the new card game will be based on the 1980s best-selling book called “The Way of the Tiger,” written by Jamie Thomson and Mark Smith.
The game’s title will be “Arena of Death” and its players will fight in fantasy-themed card battles with features from the original gamebook series.
Ensuring card ownership
Thomson is also Fabled Lands’ chief executive officer and decided to use blockchain technology because he believes it suits what he is trying to achieve better than a traditional videogame. He said:
“We were going to relaunch the series into a computer game format but this new technology (blockchain), just made more sense. Imagine playing Magic the Gathering but knowing if you owned a card, it really does belong to you. Or if we say there are only 100 editions of an item or skill, you know there really are only 100 editions.”
The company plans to use non-fungible tokens (NFT) on the Vechain blockchain — which has been associated with enterprises and supply-chain management — to ensure ownership of in-game assets.
Vechain will allow creating cards and in-game items “without having to deal with all the crypto stuff,” says Thomson.
In-game blockchain tokens gaining popularity
The tokenization of in-game assets appears to be a growing trend. As Cointelegraph reported in late November, Blockchain game F1 Delta Time — licensed by the world-renowned racing series Formula 1 — held an auction of F1 car-branded NFTs.
Elsewhere, the Ethereum (ETH) based trading card game Gods Unchained has far outstripped CryptoKitties by volume after a censorship scandal involving game-developer Blizzard, reaching almost half of a million NFT transfers per day.
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Tell Us About Your Financial Dreams
Timor Invest
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Everyone has financial dreams. So today, we want to know about yours.
See, thanks to our experts’ stock recommendations this year, Sovereign Investor Daily readers like you are closer than ever to achieving their dreams.
For example, one of our experts, Brian Christopher, handed you some great stock picks this year.
They include:
We’re thrilled that these free trades are giving you opportunities to grow your wealth — especially as the holiday season rolls around.
So today, we want to take a moment to check in.
Have our experts’ stock recommendations helped you get closer to achieving your financial dreams?
What are those dreams? Is it to retire comfortably, take a grand vacation somewhere exotic, buy that car you’ve always wanted … or something else?
We’d love to hear your stories!
Just take this three-question survey.
And keep an eye out. I’ll be sharing some of your dreams in an upcoming article so you can hear from others in the Sovereign Investor Daily family.
Speaking of which, I asked some of our experts to share some financial dreams of their own…
Brian told me: “There are only 24 hours in a day. That limitation means we have to allocate our time effectively. Achieving success in investing helped me improve other parts of my life … because it freed up my limited time to focus on them.”
One of our other experts — Total Wealth Insider Editor Jeff Yastine — said: “Thanks to the wherewithal to save, invest and speculate with our money, my family and I built the house we wanted, where we wanted. No mortgage. No car loans. No worries about bills. That’s all anyone can really want or need, in my book.”
He added: “My financial dreams these days are for my subscribers to Total Wealth Insider. In my dreams, every stock I recommend goes up 100% or more. Maybe that level of perfection isn’t possible, but I’ll continue to strive for it so my friends can achieve their financial goals, their financial dreams, as rapidly as possible.”
Thanks for sharing your dreams, Brian and Jeff.
And remember, we’ll be sharing some of your dreams in an upcoming issue. Just take this three-question survey to get yours submitted.
Hope you’re enjoying a wonderful Thanksgiving holiday.
Regards,
Assistant Managing Editor, Banyan Hill Publishing
P.S. In his new presentation, Jeff reveals surprising details about a company that may soon stand alongside Google, Apple and Starbucks as a global household name. And yet, due to a unique situation, few Main Street investors are aware that this stock even exists. That won’t be the case for long, though. To find out why, click here now.
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