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The smart money makes its move

Also: Bonavista names a new CEO, and FirstEnergy weighs in on Crescent Point’s recent acquisition

When he was younger, Max Fawcett wanted to make a mint in the markets. Now as the managing editor of Alberta Venture he gets to write about them. Close enough, right? He can be reached at mfawcett@albertaventure.com

Nov 28, 2012

by Max Fawcett

There are worse investment strategies out there than following the smart money, and right now it’s pouring into Canadian energy stocks. According to Ted Dixon, the CEO of INK Research, a firm that tracks insider activity, the buying-to-selling ratio (a bullish sign) for Canadian energy stocks is higher than any other sub-index on the TSX. As the Edmonton Journal’s Gary Lamphier noted in a story last week, the companies with the heaviest insider buying include Penn West Petroleum (TSE:PWT), DeeThree Exploration (TSE:DTX), Superior Plus (TSE:SPB), Cequence Energy (TSE:CQE), Pengrowth Energy (TSE:PGF), Sure Energy (TSE:SHO) and Baytex Energy (TSE:BTE). The last time there was such an imbalance between insiders buying and selling? Late May, right before the market started its latest move upwards.

At its annual investor day, Bonavista Energy (TSE:BNP) surprised some with a change in management. Jason Skehar, the president and COO of the company since 2008 and a man who started with Bonavista back in 1999 as a production engineer, will take over from Keith MacPhail effective next Monday. MacPhail will stay on with the company as executive chairman. FirstEnergy attended the investor day, and saw nothing to change its mind on the company or its fortunes. It reiterated its $20 price target and outperform rating, noting that the company’s balance sheet – based on 2013 estimates – is in clean shape, with only $461 million (or half the company’s $1 billion credit facility) outstanding excluding long-term notes. That gives the company “a great deal of flexibility,” FirstEnergy said, both in terms of its capital program and its ability to fund its dividend. And at the investor day, Bonavista’s management reaffirmed its commitment to maintaining that dividend, noting that it would sooner lower its growth targets than cut the dividend.

FirstEnergy also released a note about Crescent Point Energy (TSE:CPG)’s recent Utah acquisition and the impact it may have on the company’s prospects going forward. It too earned an outperform ranking, albeit with a slightly reduced price target of $51.50. “The Ute Energy acquisition is consistent with the Company’s strategy of acquiring large OOIP [original oil in place] positions where Crescent Point can apply its expertise of horizontal and vertical drilling in order to continue creat¬ing shareholder value,” analyst Cody Kwong wrote. “As well, we believe that in this new core area, Crescent Point will retain a competitive advantage in terms of further expansion, similar to its core operations north of the border.”

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