encana

Canadian Natural Resources, $46.30, symbol CNQ on Toronto (Shares outstanding: 541 million; Market cap: $25 billion), is Canada’s second-largest independent oil-and-gas producer (only EnCana Corp. is larger). Calgary-based Canadian Natural operates in western Canada, where its 100%-owned, $9.7-billion Horizon Oil Sands Project is located, the North Sea and off the coast of west Africa. Canadian Natural’s product mix is about 57% oil (32% heavy, 25% light) and 43% natural gas. Canadian Natural’s production is set to increase in 2009 with the planned first-quarter commissioning of the Horizon Oil Sands Project. When it reaches full capacity, Horizon will produce 110,000 barrels of oil per day (15% to 20% of the company’s total production). Canadian Natural’s conventional North American oil-and-gas properties are located in B.C., Alberta and Saskatchewan. Canadian Natural’s North American oil-and-gas production represents about 88% of its total production. Heavy oil operations are also located in Alberta’s Athabasca region, at Pelican Lake, and at Primrose North, Primrose South and Primrose East....

HARBOUR FUND $14.56 (CWA Rating: Conservative) (C.I. Mutual Funds, 151 Yonge St., 7th Floor, Toronto, ON, M5C 2W7. 1-800-268-9374; Web site: www.cifunds.com. Load fund: available from brokers.) invests in only 25 to 40 high-quality mostly Canadian stocks, and it may hold stocks for four or five years to realize their value. The $4.3-billion Harbour Fund’s top holdings include Canadian National Railway, Goldcorp Inc., Suncor Energy, Tim Hortons, EnCana Corporation, CIBC, Cisco Systems, Manulife Financial and BHP Billiton. The Harbour Fund lost 24.5% over the last year. That’s less than the S&P/TSX’s loss of 33.0%. The fund’s five-year return has averaged 5.7% annually. Its MER is 2.31%....

UNIVERSAL CANADIAN GROWTH FUND $16.35 (CWA Rating: Conservative) (Mackenzie Financial Corp., 150 Bloor St. West, Toronto, Ontario, M5S 3B5. Web site: www.mackenziefinancial.com. Tel: 1-800-387-0780; Load fund: available from brokers) holds companies with strong management and sound business prospects. The fund holds fewer than 40 stocks at all times. Universal Canadian’s top holdings include Thomson Reuters, Rogers Communications, Edwards Lifesciences, ShawCor, John Wiley & Sons, Dun & Bradstreet, Enerflex Systems, EnCana Corporation and Research in Motion. The fund’s breakdown by economic sector is as follows: 17.7% in Consumer Discretionary, 16.5% in Information Technology, 13.5% in Energy, 7.1% in Health Care, 6.3% in Telecommunications Services and 5.1% in Metals & Minerals....

TD RESOURCE FUND $17.79 (CWA Rating: Aggressive) (TD Asset Management, P.O. Box 7500, Station A, Toronto, Ontario, M5W 1P9. Tel: 1-800-386-3757; Web site:www.tdcanadatrust.ca. No load: deal directly with the bank.) invests in companies with superior asset bases, proven management and the ability to internally finance growth. The $129.1-million TD Resource Fund’s top stock holdings are mostly of “Average” quality or higher. The fund’s holdings include EnCana Corporation, Suncor Energy, Talisman Energy Inc., Goldcorp, Yamana Gold, Petro-Canada, Red Back Mining, BHP Billiton, Husky Energy, Chevron Corporation, Marathon Oil Corporation and Nexen. TD Resource Fund’s industry breakdown is: Energy, 59.3%; and Metals & Minerals, 38.5%. Its MER is 2.15%....

Although resource companies will need an economic recovery to show renewed growth, we think the long-term outlook for global resources demand is still positive. Meanwhile, we think you should cut your risk in this volatile sector by investing mainly in profitable, well-established companies that have an asset base they acquired when asset prices were low, or in mutual funds that hold those stocks. Here are two Aggressive resource funds that expose investors to two different levels of risk, measured by the stocks they hold. Both are down in value lately, but we think they have long-term gains ahead. TD RESOURCE FUND $17.79 (CWA Rating: Aggressive) (TD Asset Management, P.O. Box 7500, Station A, Toronto, Ontario, M5W 1P9. Tel: 1-800-386-3757; Web site:www.tdcanadatrust.ca. No load: deal directly with the bank.) invests in companies with superior asset bases, proven management and the ability to internally finance growth....

ENCANA CORP. $55 (Toronto symbol ECA; Conservative Growth Portfolio, Resources sector; Shares outstanding: 750.3 million; Market cap: $41.3 billion; Price-to-sales ratio: 1.1; SI Rating: Average) peaked at $97.81 in May, 2008, but has dropped 43.8% since then along with oil and natural gas prices....

Many of our recommendations have dropped sharply in the past few months, along with the overall market. Here are 10 stocks that we feel have strong rebound potential in 2009. CANADIAN IMPERIAL BANK OF COMMERCE $49 (Toronto symbol CM; Conservative Growth Portfolio, Finance sector; Shares outstanding: 380.8 million; Market cap: $18.7 billion; Price-to-sales ratio: 1.5; SI Rating: Above average) is down 37.6% from its recent peak of $78.48 in May, 2008. That’s mainly because it has the most exposure to the problems in the U.S. mortgage market among the big five Canadian banks. CIBC has taken substantial writedowns in the past year, which should cover most of the damage. It also continues to expand its retail banking operations, as well as scale back its riskier operations. CIBC is a buy....

Franco-Nevada Corp., $20.16, symbol FNV on Toronto, (Shares outstanding: 100.3 million; Market cap: $2 billion) holds a portfolio of about 285 royalties and other investments in gold and other precious metals, natural gas, oil and base metals. Most of its investments (95%) are located in politically stable North America and Australia, and are operated by large companies such as Barrick Gold, Goldcorp, Xstrata Nickel and EnCana. Franco-Nevada generates cash flow from royalties on mines such as Goldstrike (gold), Stillwater (platinum group metals: platinum, palladium and rhodium), and its interests in more than 100 oil and natural gas properties in western Canada. The company also has growing cash flow from its interests in mines such as Bald Mountain, Marigold, Robinson, and Falcondo. New mines such as Cerro San Pedro and Mesquite are increasing production. Most recently, Franco Nevada paid $103.5 million to acquire a 7.3% royalty interest from Gold Quarry Royalty Property in Nevada. (All figures except share price and market cap in U.S. dollars.)...

ENCANA CORP. $57.80 (Toronto symbol ECA; Shares outstanding: 749.8 million; Market cap: $43.3 billion; SI Rating: Average) is a leading North American producer of natural gas and oil. Natural gas accounts for 80% of its production. EnCana focuses on unconventional properties, such as early-stage gas fields and oil sands. These have much longer production lives than conventional properties. Right now, that gives EnCana a longer term resource base than Imperial Oil, although a return to high oil and gas prices would let Imperial continue to develop some of its higher-cost oil sands and Arctic natural gas prospects. EnCana has postponed its plan to break itself up into two separate companies — one focusing on natural gas, the other on oil sands and oil refineries. That’s because falling energy prices and the problems in credit markets would likely make it difficult for the two new smaller companies to raise capital to fund new projects....

Our oil and gas trust recommendations hit record highs in 2007 and 2008, mainly in line with soaring oil and gas prices. In mid-2008, oil hit a record peak of $147 U.S. a barrel. Natural gas prices reached as high as $14 U.S. per thousand cubic feet. Oil and gas stocks have fallen since those highs. Oil is currently trading at just $43 U.S. a barrel. Natural gas prices are now at around $5.87 U.S. per thousand cubic feet. We still advise against over-indulging in oil and gas trusts or stocks, and we’d continue to confine investments to well-established companies or trusts that can survive during the inevitable price setbacks....