From Natural Gas to Big Macs

A lot of interesting developments occurred last week on some stocks I have been watching and/or holding.  I have noticed a significant increase in my holdings: Encana, Rogers, Royal Bank, and Shaw Communications etc. are all advancing.  I was hoping to have published this post over the weekend, since it was last week’s news. So here goes better late than never!

Bank of Montreal (BMO)

BMO is on the move! Back on December 20th BMO share prices had slumped down from approx $59 to $56.60 per share following missed earnings expectations and Moody’s Downgrade after BMO purchased Marshall & Ilsley Corp. BMO is currently trading back up at $59 per share, in large part because of its high yield of 4.8% which is a favourite amongst dividend investors. For more in depth info on BMO I refer you to the Passive Income Earner. One thing that concerns me with BMO however is the negative cash flow of 11 Billion. Although BMO has 411 Billion in assets, until I can understand why there is a negative cash flow I am not a buyer.

Encana Corp (ECA)

Encana

I wrote about Encana in September 2010, when I purchased around the $29.50 as A Natural Gas Play. Its been a rough ride with this stock, but I held as I felt NG had nowhere to go but up, and I also felt Encana was a value play stock. Last week confirmed all that when Encana announced some major shifts in is business.  Encana has some good fundamentals, a low PE of 10.54, as well as a low liabilities to equity ratio of 0.95.

Encana is now on the move, having broken the $30 support level, and is starting to break the next support level at $31. On January 13th the Globe and Mail reported Encana will supplement its business with oil production and oil exploration. Encana was previously a diversified oil and NG company, before it split into Cenovous and the current Encana. As well Encana is in a major deal with China Natural Petroleum to supply NG – that’s huge! Today Encana announced its selling its Fort Lupton natural gas plant and gathering systems in Colorado for US$303 million. From this recent news, it looks like Encana is restructuring and making some significant strategic plays, and investors have welcomed Encana’s move back into oil production. I have always liked Encana and I bought in September as a Natural Gas play.  Now as a diversified oil and gas company (like Husky for example), I think Encana will do well in 2011. I’m holding!

George Weston (WN)

George Weston

The sell-off of George Weston last Friday was sudden and swift, but not unexpected. Once markets opened on Friday the 14th, the ex-dividend date, investors sold off in droves. I wrote about the George Weston special dividend back in mid December, and I decided to buy 10 shares as a speculative play. It had a high PE ratio of 24 and was trading at its 52 week highs, so definitely did not fit the criteria for my core holdings.  At $79 per share however the special dividend of $7.75 was too good to ignore. Today the stock has dropped down to $73 per share, but I’m holding and here is why.

In the long run I think George Weston will recover and rebound. The current sell-off is everything to do with the special dividend. With these kinds of dividends, the resulting price decline is usually equal to the value of the special dividend amount, and is usually short term.  Although WN is trading near its 52 week highs, it’s also showing a long-term upward trend.

This is a big brand name company that owns Loblaw Companies and Western Foods. For those who are not familiar that includes Superstore’s President’s Choice brand, PC Financial, etc.  So in the long run I may make more with a buy and hold strategy, and I may decide to purchase even more shares once the decline levels out. However the high PE Ratio of 24.51 and liabilities to Equity ratio of 1.88 is by no means indicative of a value stock, but there is at least a nominal dividend yield of 1.90%. I’m holding this stock for the growth potential.

update  ~ Jan. 20th

This morning I reached my loss point, and sold at $71. Had I sold first thing on the ex-dividend on the 14th around $80, I would have made a nice return. So with the special dividend of $7.75 per share and loss in share price I am down over 7.5%. But the $62 loss is minimal and a good lesson. No more speculating!

McDonalds Corp (MCD)

McDonalds

I like McDonalds and as I have written before, you really can’t go wrong supporting this global fast food empire. I already recommended McDonalds back on October 1st, when it was trading at $74.51 per share, and wrote about it recently in My Stock Picks for 2011. It’s one of those stocks that are fuelling the American Economy since the 2008 crash. McDonalds hit over US $80 on December 7th, and then sold off from its highs closing at $72.67 last Thursday. As I mentioned in my Stock Picks, be nimble and quick, as the stock is already on its way back up currently trading at $75 this morning! As they say buy on the dips. While the P/E ratio is high at 16.77, it does have a nice McDividend of 3.2%. McDelightful and McTasty!

13 Responses to “From Natural Gas to Big Macs”

  1. The Dividend Pig

    Jan 19. 2011

    I am also long on MCD and like the company in the low 70s. I loved the company in the high 50’s – low 60’s. But I’ll prob have to wait for another recession for those prices.

  2. The Dividend Ninja

    Jan 20. 2011

    @Dividend Pig
    Oink Oink, I agree :) The sell-off from the high off $80 makes McDonalds a good buy in the 70’s. Buy and hold!

  3. Matthew C. Waterman

    Jan 22. 2011

    Why wait for the pullback? It’s fairly priced, and the dividend has a great history of raises. Seems like you might as well just buy now rather than waiting for something that might never happen.

  4. The Dividend Ninja

    Jan 22. 2011

    @Matthew thanks for posting! Yes I most certainly would if I could, but I am fully invested :)

  5. MA

    Jan 23. 2011

    I am a big fan of WN and MCd’s and hold big positions. Can you take a look at Enercare? ECI.t (formerly CWI.un Consumers waterheaters) Great dividends was about %10 and has had quite a run since leaving the income trust world. Thanks!

  6. The Dividend Ninja

    Jan 23. 2011

    @MA
    Yes I will look at Enercare for you after my current “Potato” post :)

  7. irm

    Jan 25. 2011

    I noticed that over the past couple of days someone (anonymous) has been buying WN like crazy with a STOP of $71. It looks they are managing to control the price with BIDs for just enough shares that keep pulling the price back. It would seem something is up.

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