You would have to have been sleeping under a rock if you haven’t heard that oil is the cheapest it’s been in years! And while oil is cheap, are oil-based stocks cheap too? Yes and no.

Yes, the answer is simple at first glance. Stocks like Suncor Energy Inc. (TSX:SU)(NYSE:SU) and Canadian Natural Resources Limited (TSX:CNQ)(NYSE:CNQ) are cheap. Shares of both companies trade at levels close to their 52-week lows.

But are these stocks valuable at these levels? No.

Although share prices of oil-based companies have plummeted over the past year, they haven’t fallen as much as the price of oil. Oil has tanked nearly 50% over the last 12 months, but shares of Suncor and Canadian Natural Resources are down roughly 12% and 19% respectively in comparison. When you juxtapose that to the 50% drop in oil prices, a 19% discount does not look appealing.

In fact, one value investor and portfolio manager has completely moved away from oil stocks, given the environment. In an interview with BNN, Barry Schwartz, chief investment officer and portfolio manager at Baskin Wealth Management, says he currently has zero weight in energy in his portfolio. That’s because oil-based energy stocks have gotten cheaper in price, but are more expensive on valuation and that concerns him. For example, he says Suncor was trading around similar (approximately $30) levels when oil was about $90 a barrel a year ago.

Today, oil is around $43 and Suncor is still in the $30 range. This makes Suncor more expensive in valuation and begs one to question the amount of money the company is making in this environment.

There’s no doubt that Suncor and Canadian Natural Resources are incredible companies with solid managements. Their balance sheets are strong, their dividends are stable, and they are the companies most likely to weather this oil-storm.

However, if investors are looking for value right now, Suncor and Canadian Natural Resources may not be your best bet, given the information above.

Instead, investors should look at other companies and even sectors of they want to find good value for their buck.

Investor options?

For those investors who are still interested in sticking to the energy space, one company that has better valuations is natural gas company Tourmaline Oil Corp. (TSX:TOU). In the past year, while oil has fallen about 50%, Tourmaline is down about 28%. It’s not incredible, but it definitely has a smaller price-fall gap than Suncor or Canadian Natural Resources. Tourmaline also has a strong balance sheet and reported promising earnings for the quarter.

The post Why One Value Investor Says Not to Buy Suncor Energy Inc. and Canadian Natural Resources Limited appeared first on The Motley Fool Canada.

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Fool contributor Sandra Mergulhão has no position in any stocks mentioned.

It’s always a good deal to pick up stocks at discounted valuations. However, sometimes the risks are simply too high to make such purchases worth it. Investors should always be cautious and not get blinded by too-good-to-be-true deals. For long-term investors, quality should always be the top priority.

The current performance of SNC-Lavalin Group Inc. (TSX:SNC) is causing some investors to wonder whether they should give in to the low valuations of the stock. Let’s take a look at what’s going on with SNC.

The bad

The biggest shadow hanging over the company right now is its past. In 2012, many of SNC’s previous executives were ousted from the company due to allegations of fraud. These issues haunt the company to date. In fact, in late February 2015 the RCMP formally laid corruption and fraud charges against the company. On March 19, 2015 the courts had the preliminary hearing for seven of nine people charged in connection with fraud involving construction of the McGill MUHC hospital in Montreal.

SNC’s credibility continues to hang on the line and many doubt the firm’s ability to bid for government projects (which comprises the majority of SNC’s business model).

Other problems include a weak earnings guidance for 2015 and downgrades from analysts. As a result, the company’s share price has come full circle and is now trading at levels similar to when current CEO Robert Card joined the firm.

The good

Just last week, the firm announced it has been awarded a contract by a Dubai-based company to provide engineering, procurement, and construction management services. Work on this project has already begun and is expected to end by 2017. This shows that all is not lost in terms of SNC’s credibility and ability to attract clients.

The company also posted good earnings for the fourth quarter, mainly due to its acquisition of Kentz Corporation. Furthermore, it increased its dividend payable on April 1. Add to this list one of its biggest prized possession—the Highway 407. Management says this will be divestible sometime in 2015.

Another thing investors must remember is that although SNC’s past ghosts will continue to haunt the company for the next few years, analysts don’t believe this will impact the business negatively since the market seems to have already priced in the scandal.

So, is this weakness a good buying opportunity for investors or are the risks just too much?

The bottom line is that SNC is a great company that has proved it is truly trying to turn itself around. For seasoned investors who love to pick up a bargain, this may be one of the best bets to come along in a long time.

Of course, always remember that companies in the process of a turnaround always come with a lot of volatility. So, if you decide to take the plunge, make sure you have the stomach for it!

The post Is SNC-Lavalin Group Inc. Worth its Bargain Price? appeared first on The Motley Fool Canada.

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Fool contributor Sandra Mergulhão has no position in any stocks mentioned.

BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) is set to report its earnings for the fourth quarter on March 27 and all eyes will be on the numbers of this former smartphone leader.

The company that was once Canada’s pride fell as the world watched, and today, those who own a BlackBerry device are often mocked.

However, I still believe BlackBerry is an outstanding company that currently has an incredible leader at its helm. Since CEO John Chen took over, BlackBerry has consistently proved its critics wrong.

The company recently introduced a number of new devices and a new tablet, which caused a lot of eyebrows to rise. Investors and critics are wondering what the company is really up to by introducing new devices when BlackBerry has been lagging in that market segment.

Last weekend, BlackBerry unveiled the SecuTablet—targeted at business users, because it allows personal information to be kept separate and secure. This tablet uses a German technology that BlackBerry purchased last year and is based on Samsung hardware and IBM software. The company also recently launched some new handset models.

Some analysts are concerned about these moves. Morgan Stanley’s James Faucette says BlackBerry’s initial sales for the Classic are nowhere close to the 2-3 million target expected for 2016.

Peter Misek, Managing Partner, DN Capital says investors should not focus on hardware or handset sales. That’s BlackBerry’s past. Yes, the hardware business is the biggest part of the company right now and John Chen is pushing for a targeted number of handset sales to meet certain objectives. That’s because until now, it’s the handset sales that have been largely responsible for keeping BlackBerry afloat.

What investors should focus on instead is the performance of BlackBerry’s software and service business, the Internet of Things, as it is called. That is BlackBerry’s future and that is what will drive the company to succeed and turnaround completely.

John Chen has indicated that his company is on the verge of finally being profitable again. When BlackBerry reports its numbers next Friday, investors should pay attention to its software revenue. Misek says that department provides BlackBerry with a recurring revenue stream that has high margins.

Another notable performance measure would be to see how many customers decided to pay for BlackBerry’s EZ Pass program. BlackBerry developed this program to migrate its operating system to one platform. Previously, the company was using two operating systems to manage OS 5 (BlackBerry Enterprise Services 5) and OS10 (BES 10) devices. Starting February 1, customers had to pay to continue to use this service. So, it will be interesting to see how many of the 7.5 million customers were willing to pay for the software service. It would be a big win for BlackBerry if most of its customers decided to do so.

As for those debating about whether to buy shares of the company or not, one thing to keep in mind is there’s a lot of volatility attached to companies trying to make a turnaround. If you have the stomach for it, then BlackBerry is indeed likely to be a promising addition to your portfolio.

The post What Investors Should Focus on When BlackBerry Ltd. Announces Results Next Week appeared first on The Motley Fool Canada.

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Fool contributor Sandra Mergulhão has no position in any stocks mentioned.

Troubled Canadian plane and train maker Bombardier Inc. (TSX:BBD.B) seems to have finally caught a break. The company says it has received a new order for 20 of its highly anticipated CSeries jets. The order is worth $1.5 billion and has been placed by a new, low budget Malaysian airline, Fly Mojo.

This ray of hope comes after a slew of disappointments in the recent months. The company’s balance sheet is the biggest concern at the moment, due to its liquidity levels. Bombardier also cut its dividend, suspended its corporate jet product line, and laid off a bunch of employees. Not to mention the numerous delays on the test flights of its CSeries.

In an attempt to win investors’ confidence back, Bombardier brought in a new CEO and even got a few CSeries jets off the ground for successful test flights.

Now, Fly Mojo says it intends to purchase 20 CS100 jets with the option of increasing that order to another 20. While this is encouraging, I’m still not jumping for joy to hear this news. After all, the deal isn’t done yet and Bombardier hasn’t put the money in the bank. We’ve previously seen Russia cancel orders it placed for jets. So, until the transaction is complete and the ink is dry, I’m not getting my hopes up.

Of course, the likelihood of this Malaysian airline deal going through is far more encouraging than the deal was in Russia’s case. That’s because senior representatives of the Malaysian government were present at the signing ceremony. Fly Mojo will also be the first CSeries customer in Southeast Asia if this deal is complete.

Risks still prevalent

Bombardier is trying everything it can to win back the love shareholders once had for the company. But there are two key things that need to happen before I can seriously consider buying shares of the company.

First, and most importantly, Bombardier should strengthen its balance sheet and increase cash flow. Second, the CSeries should be officially on the market and delivered to customers. The total orders for the CSeries jets stands at 603—this includes firm orders, letters of intent, including Fly Mojo’s, and other commitments for the CSeries. That number could very well increase, given the progress in test flights. June would be an interesting time to gauge the demand for the CSeries, as the Paris Airshow takes place at that time.

Until then, I’m staying away from Bombardier.

The post Bombardier Inc. Gets New CSeries Orders. Is This a Turning Point for the Company? appeared first on The Motley Fool Canada.

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Fool contributor Sandra Mergulhão has no position in any stocks mentioned.

Crescent Point Energy Corp. (TSX:CPG)(NYSE:CPG) is undoubtedly a darling among investors, given its commitment to protecting dividends.

The company currently yields about 9.8% and has never cut its dividend. Ever. That’s precisely why investors love this company. It has always done everything it can to avoid slashing the dividend, and thus has earned the trust of its shareholders. During tough market conditions, Crescent Point prefers to opt for a cut in its capital spending budget as a way to ride the volatile times.

In November 2014, when the company’s dividend was over 12% in a scary oil environment, investors were on the edge of their seats, wondering if a dreaded dividend cut would be announced. But Crescent Point did not disappoint and decided to try and get costs down immediately by cutting capital expenditure instead. Since then, they have done a great job keeping costs low.

The company announced its fourth-quarter results this week, which met expectations on both production and cash flow. Moreover, it did well on its recycle ratios, which came in at 2.5 times. This means Crescent Point is able to get a return of about 2.5 times of what it costs to find a barrel of oil. That’s not bad in the current oil environment.

What’s more important is that the Crescent Point has increased its financial flexibility. It has bumped up its credit facility by 40%—adding about $1 billion. This is crucial, since it gives the company more flexibility to make crucial decisions if and when the oil market changes. An addition of $1 billion to its books indicates that Crescent Point may be ready to use this money to make some pretty valuable acquisitions and asset purchases.

It’s hard to determine the exact time and value of a purchase, or if in fact it makes one at all. But it sure looks likely, given the fact that the company’s books are strong. It’s only a matter of time when weaker energy players with great assets will have to give in to the $47-50 oil prices. That’s when companies like Crescent Point will sweep in and add quality assets to their holdings at “throw-away” prices.

One portfolio manager at Sentry Investments (who is also a shareholder of the company) believes Crescent Point will make an acquisition sooner rather than later. Furthermore, an analyst from CIBC World Markets says a change or revision in the company’s balance sheet, like a reduction in capital expenditure, will most likely be announced after spring break. Only time will tell.

Since the start of the year, shares of Crescent Point are up about 5-7%, but when compared with the same time last year, its shares are down about 29%. The company currently trades at the low end of its 52-week lows, which is a decent entry point.

So, if you are considering adding Crescent Point to your portfolio or are looking to increase your stake in the company, now may be a good time to do so.

The post Is Crescent Point Energy Corp. Ready to Lead the Energy Sector in Acquisitions? appeared first on The Motley Fool Canada.

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Fool contributor Sandra Mergulhão has no position in any stocks mentioned.

Many investors tend to focus on the usual suspects within the energy sector when looking to park their money—the usual suspects being Suncor Energy Inc. and Canadian Natural Resources Limited. There is no doubt that these are great investments. In fact, I have constantly recommended adding these stocks to one’s portfolio.

However, there’s one thing investors need to realize. Although share prices of oil-producing companies have plummeted over the past year, they haven’t fallen as much as the price of oil has.

Oil has tanked nearly 50% over the last 12 months, but shares of Suncor and Canadian Natural Resources are down roughly 12% and 19% respectively in comparison. When you juxtapose that to the 50% drop in oil prices, a 19% discount does not look as appealing.

Instead, there’s another energy stock that is a better investment option right now—a natural gas company.

In the last 12 months, Tourmaline Oil Corp. (TSX:TOU) has fallen about 28%. Whether that’s good news or not depends on which side of the fence you sit on. It’s not pleasant for those investors who already have a long-term position in the company, but this is a very attractive company for those interested in buying some shares of Tourmaline.

The company’s current performance has been promising as Tourmaline reported strong quarterly earnings. Its capital expenditure came in slightly ahead of expectations, as Tourmaline was able to complete additional property acquisitions during the quarter.

Additionally, the company is still on track to post decile per-share growth of 40% in 2015. Some analysts believe that strong results across its land base, improved capital efficiencies, and less facilities spending is what will drive the company to stay on track.

Tourmaline has a strong balance sheet with a debt-to-cash-flow ratio below 1.5 times. Such a level of debt-to-cash-flow puts the company in a great position, given the current commodities environment. Natural gas prices are around $2.80 and a $2 price tag is increasingly becoming a new norm for the commodity. As a result, several opportunities could arise where companies with weak balance sheets will be forced to go on sale. That’s when strong players like Tourmaline will come in and easily swoop up the best of the assets at “throw-away” prices.

Of course, no one can predict where oil or natural gas prices are headed. There is bound to be plenty of volatility and companies are likely to bleed. But if you think you have the stomach for the energy space, Tourmaline is indeed a favourite among the intermediate natural gas names.

The post Here’s 1 Energy Stock to Buy: Tourmaline Oil Corp. appeared first on The Motley Fool Canada.

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Fool contributor Sandra Mergulhão has no position in any stocks mentioned.

Almost every investor or investing enthusiast must have read at least a snippet of Warren Buffett’s annual shareholder letter over the weekend. The massive 20,000-word transcript was a special addition to mark Buffett’s 50th anniversary leading Berkshire Hathaway Inc.(NYSE:BRK.A)(NYSE:BRK.B). It contained all sorts of investment advice, strategies, and forward-thinking guidance for Berkshire shareholders and investors at large.

Charlie Munger, vice-chairman of Berkshire Hathaway, also talked about the investment mistakes the company made—mistakes that involved not making a purchase rather than making one. “While mistakes of commission were common, almost all huge errors were in not making a purchase,” Munger wrote in the letter.

Buffett followed that letter with a one-hour interview on CNBC, where he answered viewers’ questions on everything from the rationale behind his investment moves, to politics, his diet, and he even had some advice for Cleveland Cavaliers’ LeBron James.

However, one message clearly stood out in all of this: Don’t invest in a company just because someone else does so.

That’s something Buffett continued to mention on CNBC. It’s a piece of advice I will remember for a long, long time. It is an extremely simple and obvious idea, but one that is easier said than done. Investors look up to investment gurus (like Warren Buffett) for guidance, often mimicking their investment moves. I’ve done that several times too. After all, you can’t go wrong if you follow the best of the best, right? Wrong.

Buffett tells investors they should never ever invest in a company just because someone credible and successful has done so. He admitted to doing that once when he was in his 20s and he got told off for it. Since then, he has never made that mistake again.

Then again, if a legend like Buffett is increasing his stake in, say, Suncor Energy Inc.(TSX:SU)(NYSE:SU), why should investors like you and I not do the same? It should be a safe bet, after all. However, Buffett stresses that investors should try to remember that every person has a different agendas and different objectives. Buffett’s reasons for buying Suncor may be completely different from my investment strategies or objectives, even though both strategies may include a long-term hold in said company. After all, Buffett buying Suncor may only be a means to an end to achieve a bigger goal.

Moreover, investors like you and I don’t have the same resources as Buffett (I don’t know about you, but I definitely don’t have US$73 billion at my disposal!). Nor do we have the same skill set as he does.

So, instead of blindly following popular investors with a great track record, Buffett suggests doing your own research and understanding the potential company thoroughly. Look at its balance sheets and its management. And only if you truly believe that this company will be valuable in the next 5-10 years and will continue to grow, you should park your money there.

The post One Important Lesson From Warren Buffett appeared first on The Motley Fool Canada.

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Fool contributor Sandra Mergulhão has no position in any stocks mentioned. The Motley Fool owns shares of Berkshire Hathaway.

First, although these allegations are serious and could potentially have significant implications for SNC, investors must understand that these charges are not new. Investors and the rest of the world have been aware of these charges since 2012 and since then, SNC has removed everyone who was involved in the scandal, replaced them with credible executives, and has proceeded to do everything it can to turn itself around. The only new piece of information is the extent of the amount involved in the scandal. Previously, SNC had said the amount added up to roughly $56 million, but the RCMP says the actual number is closer to $176 million.

Second, an analyst at Dundee Capital Markets says that SNC could potentially look at a settlement of $300 million (that’s the worst case scenario). Although that is not an insignificant amount, it is very small for a company that generates about $8 billion in revenue. Most of the damage for SNC will more likely be due to a slam of the company’s reputation, as opposed to the settlement charges.

Third, there are huge concerns about SNC’s ability to bid for future government projects. This is mainly due to the CEO’s comments last year. Robert Card had told The Globe and Mail that SNC would not be able to handle another blow, especially if formally charged. He said the company would need to be broken up, sold, or shut down if a formal charge was levied against it, since a conviction would ban the company from doing business with the government. A huge part of SNC’s business is related to government projects, so it’s understandable that investors are concerned.

But what investors must know is that the current charges do not affect the company’s ability to bid on any public or private projects. In fact, if you look at companies that were in similar situations in the past, not a single one of them have been banned or cut off so massively. So, the chances of that happening to SNC are limited. Moreover, last week Quebec’s economy minister was quick to come to SNC’s defense. He said SNC needs to be preserved at “all costs” and even described the Montreal-based company as a “jewel.” So, I don’t think SNC will have too much trouble bidding on government projects.

Finally, investors should expect this scandal to drag on. If you look back, KBR Inc. had a similar scandal and it took them about a decade to settle the case. Similarly, investors should expect a similar timeline for SNC. However, they must try to remember that these scandals are from SNC’s past. The current management is strong and ethical and has vowed to “vigorously defend itself and plead not guilty.”

Bottom line

Investors should try to focus on the long term. For SNC, these problems will probably continue to haunt them for a while, but I don’t think SNC’s business prospects will be impacted too much because of this as the market already knows about these problems. There are other catalysts that are more likely to impact the company’s performance (like oil prices, for example).

If you are a new investor, I’d suggest sitting on the sidelines, since turnaround companies usually come with a bit of baggage and risk. However, if you are a seasoned investor, then buying turnaround companies can often lead to huge rewards in the long run.

The post 4 Things Investors Must Understand About the Charges Against SNC-Lavalin Group Inc. appeared first on The Motley Fool Canada.

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Fool contributor Sandra Mergulhão has no position in any stocks mentioned.

His investment style and strategy is followed by numerous investors and firms. Any time Buffett buys or sells positions in a company, it makes news and people take notice.

Now, as the price of oil seems to be getting comfortable around the $50-52 mark, industry experts still remain unsure whether this is the bottom for the commodity. However, they seem to be more certain that oil prices will not go up to their previous highs anytime this year. That doesn’t really help investors and leaves many of them unclear about the best time to get back into the energy sector.

A reassuring sign is when one of the world’s most respected investor makes his move into the current “taboo” sector. According to latest regulatory filings, Berkshire Hathaway bought about another 4 million shares of Suncor Energy Inc. (TSX:SU)(NYSE:SU) in late December 2014, increasing Buffett’s stake in the company to over 22.35 million shares. At current valuation, that’s worth about $864 million.

He first bought shares of Canada’s largest energy company in August 2013, before the plunge in the price of oil. At that time, he purchased about 17.8 million shares of Suncor.

Today, Buffet’s latest bump in ownership of Suncor came as he sold all his shares of Exxon Mobil Corporation, amongst other companies. That’s about 41 million shares, worth nearly US$3.9 billion.

Investing strategy

Buffett is generally known and admired for his long-term investing strategies. He typically buys shares in a company and holds them for years, if not decades. Additionally, he prefers to “be greedy when others are fearful, and be fearful when others are greedy.” This translates to buying shares when prices are very low and most investors are selling the stock frantically. A perfect example of this is the energy sector, where stocks plummeted as investors pulled out of the space in a frenzy due to tumbling oil prices.

Although no one can predict whether oil prices will fall further in the next few months, investors can be reassured that prominent players like Buffett are ready to start putting their money back into the Canadian energy space. However, one thing every investor must remember is that no one is perfect in predicting stock movements. Buffett, too, has had his stock picks falter occasionally. And although he now owns a significant stake in Suncor, the company is only a very tiny part of his portfolio.

The post Why Now Might Be the Right Time to Invest in Suncor Energy Inc. appeared first on The Motley Fool Canada.

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Fool contributor Sandra Mergulhão has no position in any stocks mentioned.

Now, the company is looking to sell 67.5 million shares at $22.25 each as part of a “bought deal”. A bought deal is when an investment bank commits to buying the entire share offering from the company, taking on any financial risk at a lower price.

In Cenovus’ case, the broker took on the shares at $22.25, roughly a buck lower than Cenovus’ closing price on Tuesday. According to Bloomberg, this deal will be the third-largest transaction of its kind for Canadian energy companies over the last 15 years.

The company said the proceeds from the sale will “provide Cenovus with a stronger balance sheet and financial flexibility to pursue its planned capital program.”

What this means for investors

The most important aspect of a company for many investors is the dividend. Last week, CEO Brian Ferguson said he would reduce spending before he would cut the dividend. And by the looks of it, it seems like he is doing everything in his power to stick to this promise.

As of now, the company has only tweaked its $800 million dividend policy. Shareholders can now take a 3% discount if they enroll in the company’s Dividend Reinvestment Plan or they can continue to stick to receiving dividend payments in cash. This alteration reduces the pressure on Cenovus to pay out all dividends in cash.

Yes, Cenovus has diluted its share value, but I don’t expect this move to impact the long-term view of the stock – it certainly doesn’t change my long-term view. Cenovus is a solid company to own and one of the best energy producers in the country.

The post Cenovus Energy Inc. Is Diluting its Shares; What Does This Mean for Shareholders? appeared first on The Motley Fool Canada.

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Fool contributor Sandra Mergulhão has no position in any stocks mentioned.