encana

ENCANA CORP $34.31 (Toronto symbol ECA; Shares outstanding: 750.3 million; Market cap: $25.7 billion; SI Rating: Average; Dividend yield: 2.3%) should benefit from a new liquefied natural gas (LNG) terminal in Kitimat, B.C. This plant will convert natural gas from northeastern B.C.’s Horn River area into LNG. From there, ships will take the LNG to markets in Asia. EnCana has a 50/50 joint venture with Apache Corp. to develop a natural-gas discovery in Horn River. This week, Apache bought a 51% stake in the Kitimat terminal. Construction will begin by 2011, and the plant should start up in 2014. EnCana is a buy.

At left we announce our Stock Pickers Digest #1 stock for 2010. In choosing a #1, I look for a stock that seems to offer above-average if not great returns, but with below-average risk. Our #1’s have generally done well, and many were top performers. Autodesk, our #1 pick in 2004 for Stock Pickers Digest (and for Wall Street Stock Forecaster, our U.S. stocks newsletter), was the #1 performer among all 500 stocks in the S&P 500 that year! We’ll reveal our #1 pick for Wall Street Stock Forecaster in our Hotline on January 22, 2010. It’s sure to be different from our #1 Stock Pickers Digest selection, since Wall Street Stock Forecaster doesn’t analyze Canadian stocks....

Claymore Natural Gas Commodity ETF, $5.36, symbol GAS on Toronto (Shares outstanding: 57.4 million; Market cap: $307.7 million), aims to track the performance of the benchmark NGX Canadian Natural Gas Index, less fees and expenses. The ETF provides exposure to the Alberta natural-gas market by investing in natural-gas futures contracts. An ETF like Claymore Natural Gas Commodity is one way to speculate on price movements. But unlike a stock (such as EnCana), which can profit from expanding production by developing and exploring for reserves, an ETF like Claymore doesn’t give you any growth, but it does entail fees of 0.80% per year for costs. We don’t recommend the Claymore Natural Gas Commodity ETF....

Next week, Wall Street Stock Forecaster, our newsletter that focuses on the U.S. stock markets, will reveal its #1 pick for 2010. Don’t miss this unique opportunity to profit. If you’re not already a Wall Street Stock Forecaster subscriber, click here to learn how you can get one month free when you subscribe today. SUNCOR ENERGY INC., $36.71, Toronto symbol SU, will cut 1,000 jobs by the end of 2010. That’s on top of the 1,000 jobs Suncor has already cut following its takeover of Petro-Canada in August 2009. In total, these cuts represent about 16% of the 12,900 employees who worked for both companies before the takeover. Suncor did not say how much these new cuts would cost it, but it still expects the Petro-Canada takeover to save it $300 million to $400 million a year....

ENCANA CORP. $36 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 751.2 million; Market cap: $27.0 billion; Price-to-sales ratio: 1.9: Dividend yield: 2.3%; SI Rating: Average) was also in the running for our 2010 “Stock of the Year.” It would be a more traditional pick for us, with its dividend and higher rating, and we think it has a great long-term outlook. However, when we choose a Stock of the Year, we look for something with a reasonably sure outlook for the current year. This year, EnCana has a lot riding on the weather. EnCana’s natural-gas properties in Alberta, British Columbia, Colorado, Wyoming and Texas account for 4% of North America’s daily production....

OPTI Canada Inc., $2.10, symbol OPC on Toronto (Shares outstanding: 281.8 million; Market cap: $591.7 million), owns 35% of the Long Lake oil-sands project in Alberta. Long Lake has more than 2 billion barrels of recoverable reserves. That gives the project a life of over 40 years. Long Lake began operating in 2008. It uses steam-assisted gravity drainage (SAGD) to bring tar-like bitumen to the surface. In January 2009, Nexen increased its stake in Long Lake from 50% to 65%. It paid OPTI $757 million for the additional 15%. Nexen’s majority share makes it the operator of the project....

ENCANA CORP $36.15 (Toronto symbol ECA; Shares outstanding: 750.3 million; Market cap: $27.1 billion; SI Rating: Average; Dividend yield: 2.2%) focuses on unconventional natural gas. Its shares have moved up lately, along with higher gas prices spurred on by cold weather. CENOVUS ENERGY $27 (Toronto symbol CVE; Shares outstanding: 751.3 million; Market cap: $20.3 billion; SI Rating: Extra Risk; Dividend yield: 3.1%) specializes in oil-sands projects, oil refineries and conventional natural gas. Oil sands will need much higher oil prices to attract a lot of investor interest. Cenovus shares have moved sideways since the split from EnCana. EnCana is the more conservative of the two, with an SI Rating of Average. We see both as buys.

ENCANA CORP. $31 and CENOVUS ENERGY INC. $26 are now trading as separate stocks after EnCana split itself into two companies. One kept the EnCana name, and focuses on unconventional natural gas. The other operates as Cenovus Energy and specializes in oil-sands projects. Shareholders received one share in each of the two new firms for every EnCana share they owned. Investors should allocate 51.5% of their adjusted cost base to the new EnCana, and 48.5% to Cenovus. EnCana has moved up since the split, as cold weather has caused natural-gas prices to jump. As well, ExxonMobil’s purchase of natural-gas producer XTO Energy has fuelled speculation that EnCana’s smaller size will make it a takeover target. Best Buy. Cenovus has moved lower, as environmentalists demand more controls over oil-sands projects. However, its low-cost operations should help it pay for any new carbon-reducing equipment. Buy.

ENCANA CORP. $30 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 750.2 million; Market cap: $22.5 billion; Price-to-sales ratio: 2.1; Dividend yield: n.a.; SI Rating: Average) and CENOVUS ENERGY INC. $25 (Toronto symbol CVE; Conservative Growth Portfolio, Resources sector; Shares outstanding: 750.2 million; Market cap: $18.8 billion; Price-to-sales ratio: 1.1; Dividend yield: n.a.; SI Rating: Extra Risk) are now trading as separate stocks after EnCana split itself into two separate companies. One kept the EnCana name and trading symbol, and focuses on unconventional natural gas. The other operates as Cenovus Energy Inc. and specializes in oil-sands projects, oil refineries and conventional natural gas. Shareholders received one share in each of the two new firms for every EnCana share they owned. EnCana recommends that shareholders allocate 51.5% of their adjusted cost base to the new EnCana, and 48.5% to Cenovus. The two stocks could stagnate for some months while investors evaluate them. However, we see both as buys for long-term gains.

TORONTO-DOMINION BANK, $65.33, Toronto symbol TD, had to set aside more funds to cover bad loans in its latest fiscal year. However, the bank still reported higher earnings, as low interest rates spurred strong demand for new loans. TD earned $4.7 billion in the year ended October 31, 2009. That’s up 23.7% from $3.8 billion in the prior year. Earnings per share rose 9.6%, to $5.35 from $4.88, on more shares outstanding. These figures exclude several unusual items, including writedowns of securities the bank holds, and costs to integrate U.S.-based Commerce Bancorp, which TD bought last year. On that basis, the latest earnings beat the $5.07 a share that analysts were expecting. Loan-loss provisions jumped 133.3%, to $2.5 billion from $1.1 billion. Revenue rose 21.8%, to $17.9 billion from $14.7 billion....