Canadian Oil Sands COS (formerly COS.UN)

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

Post by Taggart »

There was a book about dividend investing in the late 90's by two authors who worked for Standard & Poor's. They mentioned a study that was done on stocks that had incurred dividend cuts and the performance results for the group were pretty awful. Which leads me to question why value investors get all excited after a cut is made?

Unfortunately, I'm away from home for a few weeks on the other side of the world and have no access to the above book name or authors.

I also think in terms of Charles Brandes essay on "Falling Knives". After the episode with the financial sector in 2008-2009, both in the U.S. and in Europe, I've realized that some times it can pay to be patient and wait for a while instead of being sucked in too early like top investors David Dreman and Bill Miller were.
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Re: Canadian Oil Sands COS (formerly COS.UN)

Post by nisser »

Shakespeare wrote: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?
Is that a negative return or "underperformance"? i.e. The stock returns 9% YOY while the peers returned 10%
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Shakespeare
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Re: Canadian Oil Sands COS (formerly COS.UN)

Post by Shakespeare »

Link to pdf:

http://www.google.ca/url?sa=t&rct=j&q=& ... 2063,d.aWw

They seem to be cumulative behaviour relative to the market.
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Re: Canadian Oil Sands COS (formerly COS.UN)

Post by rhenderson »

In 1999 TRP surprised the market by cutting their dividend, were punished, but only for a very short time.

http://www.cbc.ca/news/business/transca ... t-1.169193

A year later TRP was back to $15 and then went up from there. Of course COS is in a different category but I only mention this as an example that in some cases a recovery can occur quite rapidly when the value is there.
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Re: Canadian Oil Sands COS (formerly COS.UN)

Post by Taggart »

rhenderson wrote:In 1999 TRP surprised the market by cutting their dividend, were punished, but only for a very short time.

http://www.cbc.ca/news/business/transca ... t-1.169193

A year later TRP was back to $15 and then went up from there. Of course COS is in a different category but I only mention this as an example that in some cases a recovery can occur quite rapidly when the value is there.
Yes, I remember it well. I sold TRP right after the dividend cut while Tom Connolly held on to it. As an investor, you have to do what you think best at the time. Holding on to dividend growth stocks like Northern Telecom and JDS Uniphase, all the way down, after the dividend cut, has a way of changing your perception. Sort of like the cat on a hot stove. Sometimes it works, sometimes it doesn't.
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Re: Canadian Oil Sands COS (formerly COS.UN)

Post by Wallace »

Taggart wrote:...and JDS Uniphase, all the way down,
Taggart, do I remember that one! "Don't buy the internet", they said, "Buy the infrastructure". One of my great coming-of-age lessons in how not to invest! I'm hoping that all those disasters are behind me

(but I still have a small position in COS............ somewhat smaller than yesterday......)

On the other hand, Apple is sending my grandchildren to College, so I can't complain. :)
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Re: Canadian Oil Sands COS (formerly COS.UN)

Post by nisser »

Shakespeare wrote:Link to pdf:

http://www.google.ca/url?sa=t&rct=j&q=& ... 2063,d.aWw

They seem to be cumulative behaviour relative to the market.
I wish they had a "tldr" version :)
It sounds as if they looked at complete dividend omissions only, rather than partial cuts.
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Re: Canadian Oil Sands COS (formerly COS.UN)

Post by Mike Schimek »

Which leads me to question why value investors get all excited after a cut is made?
1- Because they aren't value investors -)
2- The SP might rise after because uncertainty is temporarily dispelled. People know a cut is coming, sell due to uncertainty, then once the cut is done, they uncertainty factor is gone. Markets do not like uncertainty
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Re: Canadian Oil Sands COS (formerly COS.UN)

Post by SQRT »

AltaRed wrote: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.
I think that is right. When I was involved at a big bank, a dividend cut would have been like cutting my arm off. That is why the payout ratios are generally under 50% and often lag earnings growth. Also, for the financials, there is significant regulatory oversight that generally keeps dividend policy quite conservative. At one point the bank that I worked at had to ask OSFI's permission to pay our regular div because we had recorded some losses in the previous few quarters. Obviously OSFI also would have been very reluctant to cause a div cut or deferral but their responsibility is to depositors not equity investors.

MFC is an exception here. Based on my experience, management at MFC were less conservative than the banks during this period. Generally speaking, I believe for some reason(maybe the short period of existence after their IPO's?) management wasn't up to the same level as the banks. Not sure but I sold my insurance positions after the cut. Not because of the cut really, but because I lost confidence in management and my ability to understand their financials.
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Re: Canadian Oil Sands COS (formerly COS.UN)

Post by AltaRed »

FWIW, within a day or two after COS cut the dividend and provided 2015 capital guidance, analysts were falling all over themselves providing new Target Price guidance (per BNO IL). Presumably per the operating assumptions provided by COs, they all came up with 12 month target prices in the $13-15 range. That info is worth about as much as you paid for that, but it too will change whenever COS provides new guidance OR there is a material difference in oil prices. No way of knowing what oil price the analysts used.
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Re: Canadian Oil Sands COS (formerly COS.UN)

Post by jay »

Started a small position at 10.13 in my TFSA
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Re: Canadian Oil Sands COS (formerly COS.UN)

Post by AltaRed »

Not surprising I suppose to see the big guns come in, underestimate, alienate, etc. That said, it seems the former Syncrude organization was not keeping up with what needed to be done, a situation made worse with an unwieldy ownership* structure that no doubt kept the lid on Syncrude costs.

* I've had personal experience with complex ownership structures like Syncrude in the past and they are difficult to keep effective.
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Shakespeare
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Re: Canadian Oil Sands COS (formerly COS.UN)

Post by Shakespeare »

Takeover candidate?
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Re: Canadian Oil Sands COS (formerly COS.UN)

Post by scomac »

Shakespeare wrote:Takeover candidate?
I don't think so, at least not in the current format. I would think any potential suitor of the multinational variety would want to own the entire Syncrude operation, not just an interest via Canadian Oil Sands. It's one thing to place a take over bid with one entity, but here it would be three -- COS, IMO, SU. The only way this could be pulled off is for the other partners wanting to crystallize their investments for use in other projects. This makes me think that the hurdle rate to get a deal done would be quite a bit higher than what COS shareholders would be satisfied with. I just don't see either Suncor or Imperial being sufficiently motivated. Things would have to get a lot worse.
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AltaRed
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Re: Canadian Oil Sands COS (formerly COS.UN)

Post by AltaRed »

I generally agree with Scomac with a few exceptions: 1) Syncrude can be a test bed for IMO and SU on new technologies before testing them in their own operations. There is a lot more R&D going on in the oil sands than virtually anyone 'outside' the direct players know and has been for the 20+ years I was associated with the business and Syncrude's R&D facilities and relationships with other organizations (including universities, etc) has been a good way to efficiently advance the technologies. How much that still applies, I do not know. 2) Also, Total would love to get access to many of these technologies for their advancement into the oil sands although their partnering with SU in projects is a way to do that too.

I imagine the owners have had discussions at some time about dismantling the limited corporate ownership structure and converting to a standard industry Joint Venture with one of the working interest owners as Operator but I am also guessing no party want to take over 'hands on' responsibility for liabilities at the mid-point of Syncrude's life.
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Re: Canadian Oil Sands COS (formerly COS.UN)

Post by trf1066ca »

The Chinese own 16% of Syncrude via Sinopec and Nexen (more than Suncor, by the way). Acquisition of COS's 36+% would give them outright control.

At a current market cap of $5-ish billion, that looks puny compared to last year's disastrous incineration of $15 billion on Nexen.

Although the Chinese now have first hand knowledge of what a fubar tar sands investments are, still. Besides, Mr. Harper wants their business and another chance to show off his knack for deft, specious new flip-flops on foreign investment to the rest of the world.

Be patient, though. Much more hurt inexorably coming for COS investors.
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Re: Canadian Oil Sands COS (formerly COS.UN)

Post by adrian2 »

trf1066ca, with my underline wrote:The Chinese own 16% of Syncrude via Sinopec and Nexen (more than Suncor, by the way). Acquisition of COS's 36+% would give them outright control.

At a current market cap of $5-ish billion, that looks puny compared to last year's disastrous incineration of $15 billion on Nexen.

Although the Chinese now have first hand knowledge of what a fubar tar sands investments are, still. Besides, Mr. Harper wants their business and another chance to show off his knack for deft, specious new flip-flops on foreign investment to the rest of the world.

Be patient, though. Much more hurt inexorably coming for COS investors.
So nice of you to preach to us heathens from your high tower of AGW one and only truth. The religious dogma has such a strong stench, it's almost a tidal wave. But this, too, shall pass.

ATH up 10%
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Re: Canadian Oil Sands COS (formerly COS.UN)

Post by scomac »

on Dec 4, 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:
I'm out! Thus one's too hot to handle. My gut is telling me to run while there's an offer on the table. It's only a small position and I have coverage in the space from long term hold ARX. An insignificant trading loss, but every bit helps with the gains I've realised this year.
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Re: Canadian Oil Sands COS (formerly COS.UN)

Post by biker »

Justise wrote:"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.
Looks like you might be right!Bought 500 yesterday at $8.47.Hope so!
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Re: Canadian Oil Sands COS (formerly COS.UN)

Post by AltaRed »

trf1066ca wrote:The Chinese own 16% of Syncrude via Sinopec and Nexen (more than Suncor, by the way). Acquisition of COS's 36+% would give them outright control.
Not necessarily unless you have a copy of the JV agreement to share. JV agreements have a series of voting provisions and especially corporate entities like Syncrude.
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Re: Canadian Oil Sands COS (formerly COS.UN)

Post by trf1066ca »

AltaRed wrote:
trf1066ca wrote:The Chinese own 16% of Syncrude via Sinopec and Nexen (more than Suncor, by the way). Acquisition of COS's 36+% would give them outright control.
Not necessarily unless you have a copy of the JV agreement to share. JV agreements have a series of voting provisions and especially corporate entities like Syncrude.
Well, yeah, but helpfully you didn't bring this up when scomac made his point, eh? 8)

Plus, you know, we have Mr. Harper’s word that no more state-owned-enterprises acquisitions in Canada! Er, depending on the industry. And, er, whether a change in control is involved. Or, er, if "exceptional circumstances".

'Course, as Andrew Coyne and the National Post and other true conservatives correctly pointed out, these provisions are ultimately a capricious betrayal of Harper’s professed free-market, free-trade, open-for-business beliefs. But, hey, who's perfect? In any event, not likely to gain approval, but it's still there at some price. And maybe Steve will come to his senses.

Or, if COS and/or control of Syncrude cannot change hands, maybe one more strike against COS as an investment.
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Re: Canadian Oil Sands COS (formerly COS.UN)

Post by Justise »

biker wrote:
Justise wrote:"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.
Looks like you might be right!Bought 500 yesterday at $8.47.Hope so!

Congratulation on your purchase near to this very low level.

If my prediction is correct on triple water fall theory (which I have seen stock doing that since prior 1987 great crush), the last 2 days of price rebound for COS could be dead cat bounce for the 3rd leg of water fall which will likely puncture $6 in 2015. Seems that Scomac is smelling blood, so he is taking his money and run even though he was just dipping his toe in. I am still sitting on the sideline and waiting for 2015 and may jump in if it hits $6.
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Re: Canadian Oil Sands COS (formerly COS.UN)

Post by nisser »

I think there's been more than 2 waterfalls so far and will be many to come. Most of the oil stocks have made more than 2-3 20-40% price fluctuations in the last couple of months.
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Re: Canadian Oil Sands COS (formerly COS.UN)

Post by Justise »

nisser wrote:I think there's been more than 2 waterfalls so far and will be many to come. Most of the oil stocks have made more than 2-3 20-40% price fluctuations in the last couple of months.
From what I can see from the 1 year chart is that there has been 2 waterfalls. The 2nd waterfall started without a distinct dead cat bounce and the end of the 2nd waterfall has distinct rebound. It seems that oil price is heading down again.
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