Also: three picks in the oil and gas sector from First Asset Investment Management's John Stephenson
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 firstname.lastname@example.org
by Max Fawcett
Another month, another record load factor for WestJet (TSE:WJA). The company continued its recent run of success in February, posting a load factor of 86.1 per cent (up 3.4 per cent from the same month in 2012). Passenger miles increased by 7.3 per cent on a year-over-year basis, while capacity (measured in available seat miles) grew 3.1 per cent. The number of guests was up 5.5 per cent on a year-over-year basis to 1.4 million. That’s eight months in a row of record load factors, in case anyone is counting.
The company also announced the first two communities that will be serviced by WestJet Encore, its new short-haul sister airline. Fort St. John will see daily service from Calgary and Vancouver, while Nanaimo will get daily service from Calgary. Calgary residents will also have access to non-stop flights to Dallas beginning this spring. WestJet’s shares are taking off, too, up more than four per cent on the day and a very impressive 21 per cent on the year so far.
Oil stocks haven’t done nearly that well in 2013 and John Stephenson, the senior vice-president and portfolio manager at First Asset Investment Management, doesn’t see anything looming on the horizon that could change that. He thinks oil is currently trading on the low end of its natural range, but the thing that would move it higher is better global growth, and he doesn’t see that coming in 2013 with China sputtering (well, if you can call six to seven per cent growth sputtering: it’s all relative), the sequester threatening to shave as much as three-fifths of a per cent off U.S. GDP growth in 2013 and Europe still tormenting its citizens with needless growth-killing austerity. (For an interest read from across the pond on just how futile the EU’s obsession with austerity is, check out this piece by the Telegraph’s Jeremy Warner.)
Stephenson’s top picks on last night’s BNN Market Call appearance were Baytex Energy (TSE:BTE), Inter Pipeline Fund (TSE:IPL.UN) and Pembina Pipelines (TSE:PPL). He likes the two pipeline companies for the dividend they offer and the fact that they allow investors to play the growth of production in the oil sands without exposing themselves to commodity price risks. Those two, like other pipeline companies aren’t exactly cheap on a cash flow multiple basis, but in a low-growth, low-yield world, they’re one of the few equity classes that offers access to both. Enbridge and TransCanada, after all, are both trading at all-time highs despite massive headline risk for both.
Stephenson chooses Baytex because it offers exposure to the possibility of narrowing spreads between heavy and light oil and a nice dividend to boot. “Because the Seaway reversal is underway, because Keystone will probably get approved and because BP’s Whiting refinery will come online, that WCS (Western Canadian Select) differential will close,” he said. “If it does, that’s huge – this is a company that has 80 per cent leverage to that WCS number. If you believe that’s going to narrow, it’s fantastic. And even if it doesn’t, you’re getting six per cent in a world where that isn’t easy.”