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Cold Play: Don't Load Up on Canadian Energy Stocks

Among the Canadian energy stocks, 12 are undervalued, but only one has a buy rating, and Gastar Exploration (GST - Get Report) ($2.57) is speculative trading under $3 a share. I consider a stock trading below $3 as an option on survival.

Baytex Energy (BTE - Get Report) ($37.21), Pengrowth Energy (PGH - Get Report) ($5.11) and Penn West Petroleum (PWE - Get Report) ($10.72) have recently been downgraded to sell from hold.



Note that seven stocks have double-digit percentage gains over the last 12 months, and that five have double-digit losses. Buy-rated Gastar is the only stock projected to be higher over the next 12 months. Only three have single-digit 12-month trailing price-to-earnings ratios, and 11 are trading below their 200-day simple moving averages.

In addition to the stocks presented today, I have a spreadsheet of 259 Canadian energy stocks that do not trade in the U.S. According to ValueEnginie, only five have buy ratings, 111 are rated hold, 98 are rated sell, and 26 are rated strong sell. The remainder are not rated by ValuEngine. That is a similar distribution for the stocks traded in the U.S.

The bottom line is that energy stocks are not cheap and there are no clear winners at the present time. Where I have value levels and risky levels, buy-and-trade strategies can be employed.

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Richard Suttmeier has an engineering degree from Georgia Tech and a master of science from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. In 1981 he formed the Government Bond Department at LF Rothschild and helped establish that firm as a primary dealer in 1986. Richard began writing market research in 1984 and held positions as market strategist at firms such as Smith Barney, William R Hough, Joseph Stevens, and Rightside Advisors. He joined www.ValuEngine.com in 2008 producing newsletters covering the U.S. capital markets, and a universe of more than 7,000 stocks. Richard employs a "buy and trade" investment strategy and can be reached at RSuttmeier@Gmail.com.
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