INVESTMENT ADVICE ON SUNDAY AUGUST 14 2016,
By Murray Soupcof
Good Sunday evening, loyal readers. And if this is Sunday, then there must have been another scandalous revelation about the Clinton crime family on the Sunday morning TV talk shows.
For example, maybe this timely tweet by Clinton rape victim, Anita Broderich, below – as well as proof of suppression of the evidence by NBC News, when their reporter was ready to break this shocking exploitative rape news story:
"I was 35 years old when Bill Clinton, Ark. Attorney General raped me and Hillary tried to silence me. I am now 73....it never goes away.”
Uhm, where were we regarding our Sunday night investment advice on rapeseed futures, er, sustainable dividend paying equities and rock-solid growth stocks?
Oh yes, here’s tonight’s recommendations for possible purchases tomorrow:
(1) EAGLE ENERGY TRUST ($EGLUN), yielding 11.00%
The bad news is that the company had to recapitalize after a couple of revenue-challenged losing years; but the good news is that the CEO is certain that the high annual dividend is sustainable for at least two more years.
And note that although their head office is in Alberta, most of their high-revenue, light-oil land holdings are in Texas
(2) INPUT CAPITAL ($INP.CA), with no current dividend.
This is the only streaming AGRICULTURAL royalties company in the world, with its head office located in prosperous Saskatchewan (Canada).
Most of Input Capital’s contracts are currently with canola farmers in Canada and America – farmers who are prospering because of the unprecedented demand for canola crops, for use in margarine and other profitable applications.
Just “google” canola oil and you’ll discover that the world's healthiest vegetable oil is extracted from the seeds of the canola plant. The seeds are 44% oil -- more than double the oil content of soybeans, and hence even healthier for human consumption.
And in addition to its heart-healthy properties for us two-legged creatures, canola meal is an excellent animal feed for cattle, poultry, swine and fish. For example, when it is fed to dairy cows, it can increase milk production by one litre per day. And it’s the feedstock of choice for Canadian-produced biodiesel, because of its exceptional cold weather performance. In fact, compared to fossil diesel, canola biodiesel reduces life-cycle greenhouse gas emissions by 90%.
Hence high demand for canola crops for canola farmers, and subsequent sky-high revenues.
So here’s how Input’s “streaming royalty” business works, and why future prospects for this kind of business are also sky high:
Input advances cash loans to canola farmers to buy supplies for planting, etc., and then gets a piece of the action (a royalty) after crops have been harvested and sold.
And please note that the price for canola crops recently "soared" -- in response to "supply restraints" caused by unseasonably BAD weather in canola growing areas of Canada and U.S.
(3) WALTER ENERGY/COAL ($WLT), dividend suspended until company profitability restored
The price of WLT shares hit a record low because of the flurry of U.S. EPA regulations designed to kill the alleged "polluting" coal industry (just ask Hillary about the consequences of supporting such job-killing regulations).
Throw in the fears of “pollution-free” natural (shale) gas replacing coal as a source of electric power in America, and you have the perfect storm for nabobs of coal skepticism.
However, once President Obama leaves office, obsession with environmental purity should wane, and ultimately coal's future should brighten (even if it depends on shipments to China which will be using at least some of its coal-powered plants to generate electricity for many years, until the nation's ambitious nuclear power-plant expansion policy is finally fulfilled).
Most important: since the price of WLT shares has almost negligible room to permanently fall any further -- and (in my opinion) the price is likely to rise in the future -- this seems like a very low-risk "speculative" investment which should pay off with substantial capital gains (profits) in the future.
And just to be cautious, my advice would to be slowly accumulate shares on periodic market dips (when the price of shares head lower). In other words, buy low and sell higher when possible.
(4) BUY BADGER DAYLIGHTING ($ BAD.CA), yielding 1.60%
Badger Daylighting Limited's stock price has suffered in the past couple of years due to its perceived overexposure to the oil patch. But, in my opinion, the company’s structural “versatility” could signal more prosperous times ahead for its investors.
Badger Daylighting is a leading provider of Hydrovac services in North America, and (according to the Bank of Montreal) is 7 times larger than its nearest competitor.
Hence, the following factors should be taken into account when determining Badger’s competitive advantage – especially its “versatile” vertically-integrated business model:
Using a 67,000 square feet facility, Badger builds its own hydrovac trucks. This lean business model enables one of its key competitive advantages: maintaining a strong grip on capital expenditure plans during down and up cycles in the broad economy.
Hence, during times of economic weakness, Badger is able to curb production (an initiative currently taking place) and thus sit on the sidelines in terms of growth. However, when investment and demand for their services ramps back up, Badger is in full growth mode and can instantly begin production again.
An example of this versatile model's success was on display during the depths of the Great Recession in 2008-2009. During that time, the company's top line took a significant hit. However, by reducing its fleet growth and size, it was able to defensively pay for $12 million in debt, and continue its dividend payment.
This adaptable business model also has shown impressive economic efficiency: manufacturing these trucks on its own, Badger incurs a cost of 15-20% below the market price of an equivalent OEM truck. As a result, investors should expect less volatile earnings, especially when coupled with its revenue segment diversification story:
Specifically, Badger continues to diversify from the volatile oil and gas sector.
Since inception, the oil and gas industry contributed the majority of Badger’s revenue. While throughout the years leading to 2013 the number has been declining, it still represented 55% in 2013, and was still a majority of 51% in 2014. However, following the enormous world supply glut and lower WTI crude-oil prices, oil and gas only represented 38% of 2015 revenue. And this continues to be an ongoing priority for management, to diversify its revenue segments.
Traditionally, investors have viewed Badger as an oil services company -- due to its operations of hydrovac technology as well as being based in the western Canadian oil and gas market.
However, now the company continues to prove that its technology can be extended into different sectors, such as utilities. So now much of the company’s revenue, from oil and gas, is generated through pipeline work –- generally considered to be far less volatile, revenue-wise, and capable of generating steady cash through good times and bad.
The bottom line (in my opinion)?
Badger Daylighting is an unconventional play in the growing infrastructure story in North America. The stock is undervalued due to a heavy selloff based on negative investor sentiment regarding falling oil prices.
However, with the company’s versatile business model -- which can adapt to changing economic times thanks to its pipeline holdings – I predict that the Badger shares will soon begin an impressive future ascent, one that is in alignment with the rise in the price of oil (which looks ready to soar from last year’s historical low of $30 to over $60 -- as the failing economies of Saudia Arabia & Russia force their leaders to compel OPEC to begin raising prices to stem further economic losses).
And that's my investment recommendations for tonight.
Nuff said on this topic (for now) I would think.