Canadian Oil Sands COS (formerly COS.UN)

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Re: Canadian Oil Sands COS (formerly COS.UN)

Post by Justise »

Mike Schimek wrote:Nearly doubled my holdings of COS today, it seems "weird" cheap. It dropped 5-6% while its peers rose and oil rose.
'Weird cheap'? But it is not dirt cheap yet. Like Scomac said it is cheap for a reason. The triple water fall hasn't happened yet for both oil price and O&G stocks and related stocks. Also, I am watching the fundamentals of many O&G stocks and am not convinced of the cheapness of the stocks.

Interesting read on this link - http://business.financialpost.com/2014/ ... =0233-21df

One MSM reported investors, by and large, are not buying yet despite the big drops for O&G shares. So stay calm, don't buy till much bigger drops is my belief.
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Re: Canadian Oil Sands COS (formerly COS.UN)

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'Weird cheap'? But it is not dirt cheap yet.
Not yet nope, maybe it will become dirt cheap. "weird cheap" for me is an odd feeling I get about a stock I'm thinking about buying. 90% +/- of the time when I didn't buy at that time I regretted it later, with the window of opportunity passing.
Like Scomac said it is cheap for a reason. The triple water fall hasn't happened yet for both oil price and O&G stocks and related stocks.
I have no idea what a "triple water fall" is as I don't engage in technical analysis.
Interesting read on this link - http://business.financialpost.com/2014/ ... =0233-21df
Yes it looks like his company could sell oil at $50 and break even prior to interest costs on their debt, $56 after interest. What's also interesting is that their rapid growth has been largely financed by taking on a lot of debt. In Q3 their cap ex was 2x what their profits plus DPN was, with the excess being financed by taking on about 1.5 bil in additional debt during that quarter.

I doubt that debtors will be rushing out to throw money at these companies at this time, and therefore these companies will have nowhere near the same amount of capital available to keep drilling and growing as aggressively as in the past. They can recycle their internally generated cash flow, but tapping debt markets for more capital isn't likely. In this company alone we could see their cap ex go from 3.2 bil in Q3, half of which was financed by new debt, to 1.6 bil a couple quarters down the road, because they can't borrow the 1.6 bil in debt they borrowed to be able to spend 3.2 bil in Q3.
One MSM reported investors, by and large, are not buying yet despite the big drops for O&G shares.
Well a lot of Canadian oil producers rallied today so someone had to be buying them.
So stay calm, don't buy till much bigger drops is my belief.
Yep, good luck with trying to time that perfect bottom. It's sweet when it's possible. Let us know when you see the triple water fall and decide to buy in and what you buy!
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Re: Canadian Oil Sands COS (formerly COS.UN)

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Canadian Oil Sands Announces 2015 Budget
Based on the 2015 budget, COS will continue to generate positive free cash flow; however, at the current dividend level, net debt would grow at a pace that would quickly exceed $2 billion. To moderate the growth in net debt and based on the budget assumptions, COS intends to reduce the quarterly dividend to $0.20 per share concurrent with the release of its fourth quarter results in late January. COS views this as a prudent step to preserve balance sheet strength and provide flexibility in this lower oil price environment.
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Re: Canadian Oil Sands COS (formerly COS.UN)

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Surprised it was that fast, but given recent stock pricing, I suspect the market was punishing the stock on the basis dividend should be cut.
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Re: Canadian Oil Sands COS (formerly COS.UN)

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Getting pretty interesting.
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Re: Canadian Oil Sands COS (formerly COS.UN)

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"Yep, good luck with trying to time that perfect bottom. It's sweet when it's possible. Let us know when you see the triple water fall and decide to buy in and what you buy!"


I have been right so far on COS and it seems to me that the 2nd of the triple water fall has not completed yet I.e. COS is still dropping. And the drop is accompanied by much higher volume when some others and the index is rising.

By the latest development in the announcement of 2015 budget, it seems that the 3rd leg of triple water fall will likely bring COS to around $8 to $9. That is my prediction.
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Re: Canadian Oil Sands COS (formerly COS.UN)

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OK, I'll bite. Sticking my toe in the trailings pond at $10.84 this morning. Let's see how deep this rabbit hole goes. One of these cigar butts has to turn out! :roll:
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Re: Canadian Oil Sands COS (formerly COS.UN)

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scomac wrote:OK, I'll bite. Sticking my toe in the trailings pond at $10.84 this morning. Let's see how deep this rabbit hole goes. One of these cigar butts has to turn out! :roll:
You had the right idea all along. This will become a cash cow once oil prices recover and you will get all that capital appreciation as well. Might* take 12-18 months to get there.

Book value of this thing is circa $10 or so and that would not include unbooked reserves. Ripe for a takeout by a major that otherwise has not been able to get an oil sands project going, e.g. Total, or a current working interest wanting a strangehold position (yours for only $5-6 Billion which is significantly less than a new build of equivalent size).

* This is how this became a 5 bagger for me in the first place. First bought my shares in 2002 and by circa 2006 it was a 5 bagger (combination of performance and oil prices.) Took a swag of profits off the top at that time. This is a rinse and repeat for me albeit I bought back in too early.
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Shakespeare
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Re: Canadian Oil Sands COS (formerly COS.UN)

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Bought another 300 in my LIF. If prices are still down in January - and they probably will be - I'll double up the 100 in the TFSA when I contribute (cash only about $500 now).
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Re: Canadian Oil Sands COS (formerly COS.UN)

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OK, guys, you got me in, too.

Wrote 10 contracts of COS P 15JAN16 $11 @ $1.90

(a bit of trivia: yesterday's open interest = 2 contracts; today's volume so far = 57 contracts)
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Re: Canadian Oil Sands COS (formerly COS.UN)

Post by Mike Schimek »

Whoever would have thought we'd see COS at 11 bucks a few months back when it was in its 20s

It's amazing how markets are and how something perceived as pretty solid can suddenly go to pieces.

So we're up to double waterfall, let us know when the triple happens and you buy in. After that should we expect the stock to do a quadruple rocket?
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Re: Canadian Oil Sands COS (formerly COS.UN)

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Bought my first 100 @ 14.90 a week ago or so, and today 200 more @ 10.90. Avg $12.23, Dejavu.
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Re: Canadian Oil Sands COS (formerly COS.UN)

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I'm in as well at $11.23. Buying some more for TFSA sounds like a good idea.
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Pickles
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Re: Canadian Oil Sands COS (formerly COS.UN)

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I bought a small amount in my RRSP at $10.95. It's paying a dividend of over 7%!

Meanwhile, trying to ignore the (temporary, I hope) COS carnage in my non-registered account.
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Re: Canadian Oil Sands COS (formerly COS.UN)

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Pickles wrote:I bought a small amount in my RRSP at $10.95. It's paying a dividend of over 7%!

Meanwhile, trying to ignore the (temporary, I hope) COS carnage in my non-registered account.
I am underwater too by quite a bit but that should not be the key issue. If it takes a year, even two, to turn around in a big way, total return will still be acceptable. It took my initial COS investment in 2002 a few years to go anywhere and then it took off when the ATM started to spin off cash in a big way (a 5 bagger circa 4 years later). No reason to doubt there won't be an abrupt recovery again. The key issue right now is whether the 'reduced' dividend is safe if oil averages in the $60 range for upwards of a year or so.

Added: Commodity stocks are notorious for testing one's patience for sometimes a long time before they break out. It is best to not have many of those in one's portfolio. I have 3.5 of them... COS, POT, TCK.B, partial CNQ for perhaps a 5-7% weighting overall. I would not go over 10%.
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Re: Canadian Oil Sands COS (formerly COS.UN)

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scomac wrote:OK, I'll bite. Sticking my toe in the trailings pond at $10.84 this morning. Let's see how deep this rabbit hole goes. One of these cigar butts has to turn out! :roll:

You were only sticking your toe in, how deep this rabbit hole goes depends on a lot of factors. I am still waiting because:

1. What if the oil price drops further, say, to $60, and possibly as low as $45 which I am not ruling out for next year.
2. The speed of drop in the 2nd water fall is yet to be completed i.e. I have yet to see dead cat bounce with oil at $66+
3. I went through the Q3 2014 reports which seems reasonably negative before the OPEC action. Therefore, I am still waiting for
the 3rd water fall.
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Re: Canadian Oil Sands COS (formerly COS.UN)

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Justise wrote:
scomac wrote:OK, I'll bite. Sticking my toe in the trailings pond at $10.84 this morning. Let's see how deep this rabbit hole goes. One of these cigar butts has to turn out! :roll:

You were only sticking your toe in, how deep this rabbit hole goes depends on a lot of factors. I am still waiting because:

1. What if the oil price drops further, say, to $60, and possibly as low as $45 which I am not ruling out for next year.
Neither am I. It's going to be more about how long it stays down than whatever number ends up being the absolute bottom. Ultimately the price will have to recover to the CoP which despite efficiencies in drilling shale wells will continue to creep up over time.
2. The speed of drop in the 2nd water fall is yet to be completed i.e. I have yet to see dead cat bounce with oil at $66+
3. I went through the Q3 2014 reports which seems reasonably negative before the OPEC action. Therefore, I am still waiting for
the 3rd water fall.
I'm not sure how meaningful charts are going to be here. For both the stock and the price of oil we have plunged through significant resistance. What good is a chart when you're in free fall? The bottom will be where the market determines it to be. Better to fire up the calculator and when the numbers begin to make sense; act!
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Re: Canadian Oil Sands COS (formerly COS.UN)

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Can any of the dividend investors out there point to an event study that looks at the returns surrounding dividend cuts? IIRC, there was one out there that indicated continued weakness over the following year - but I don't remember if that was calculated from before or after the cut was announced ...
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Re: Canadian Oil Sands COS (formerly COS.UN)

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IIRC the stock continues to go down after a cut for (a couple of months??).

Can't recall the reference - possibly Dreman.
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Re: Canadian Oil Sands COS (formerly COS.UN)

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NormR wrote:Can any of the dividend investors out there point to an event study that looks at the returns surrounding dividend cuts? IIRC, there was one out there that indicated continued weakness over the following year - but I don't remember if that was calculated from before or after the cut was announced ...
No study, but anecdotaly, MFC continued to go down for about 3 years versus its peer group of SLF/GWO which didn't cut dividends. Even now, MFC still lags 5 years after the fact.

All the Canadian large cap names that come to mind for dividend cuts over the past 15 years or so had a rough time of it following the announcement judging by the charts. Not a good combination to have an out-of-favour name in an out-of-favour sector as is often the case with dividend cuts. Intuitively, it would have to be so.

Perhaps one day we will see a similar reckoning in the rate reset preferred share market. :o
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Re: Canadian Oil Sands COS (formerly COS.UN)

Post by Shakespeare »

I would sell a dividend growth stock immediately on a dividend cut.

But resource stocks with significant payouts should be expected to have varying dividends if management is prudent. They should track the resource price, so when oil prices go back up, so will COS.
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Re: Canadian Oil Sands COS (formerly COS.UN)

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Shakespeare wrote:I would sell a dividend growth stock immediately on a dividend cut.

But resource stocks with significant payouts should be expected to have varying dividends if management is prudent. They should track the resource price, so when oil prices go back up, so will COS.
Agreed. Unfortunately it would seem, that the demand for payouts supersedes prudence (in many cases) in the current market environment -- if you pay them, they will buy! :roll:
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Re: Canadian Oil Sands COS (formerly COS.UN)

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Dreman, "Contrarian Investment Strategies: The Next Generation", p. 391.

Michaely, Thaler, and Womack, 1994.

1964-1988 period.

Underperformance after a dividend cut: 11% one year, 15.3% 3-year.

Price Reactions to Dividend Initiations and Omissions: Overreaction or Drift?
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Re: Canadian Oil Sands COS (formerly COS.UN)

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Thanks Shakes, I knew there was something out there :)
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Re: Canadian Oil Sands COS (formerly COS.UN)

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It would be interesting to know if the reactions are different between, for example, cyclical sectors and the financials. Folks investing in commodities should know that, with some significant exceptions, they ride a 6 Flags rollercoaster looking for the big score. OTOH, financials seem to get punished for a longer period (e.g. MFC, US banks) because somehow it is perceived these institutions violated a 'belief' or 'faith' that these are the widows and orphans stocks, and trust once lost is hard to regain.
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