Thursday, February 21, 2013

Husky Energy Inc 2

On my other blog I am today writing about Debt Ratios...continue...

I own this stock of Husky Energy Inc. (TSX-HSE, OTC- HUSKF). This is one of very few adventures into the oil and gas stocks I have taken. I bought this in July 2008 and at that time the stock was doing very well. However, this is not the case at present. My total return on this stock is 1.7% per year, with 4.02% per year from dividends and 2.24% per year in capital losses.

When I look at insider trading I find no insider selling and insider buying at $1.2M. It is nice to see some insider buying, however, this is a$30B company and buying of just $1.2M does not add up to much. Interestingly some of this buying has been recent at around $30.50 per share, but seems to be with a company plan.

There are not only options under this company, but other options like vehicles like Performance Share Units, Rights Preferred Share Units and Deferred Share Unit. Part of the problem with insider trading reports is that the report only treats things actually called options as options. It would seem that some the Performance Share Units have been cashed in over the past year.

The 5 year low, median and high median Price/Earnings Ratios are 10.90, 12.52 and 20.96. The current P/E based on a stock price of $30.86 and 2013 earnings estimate of $1.95 is 15.83. This shows the stock price to be a bit high, buy probably still reasonable.

I get a Graham Price of $29.03. The 10 year low, median and high median Price/Graham Price Ratios are 0.77, 1.07 and 1.30. The current P/GP Ratio is 1.06. This ratio points to a reasonable stock price. The 10 year median Price/Book Value per Share Ratio is 2.20. The current ratio is only 73% of the 10 year ratio and this ratio points to a low stock price.

The 5 year median dividend yield is 4.59% and the current yield is 3.89%. The current one is below 5 year median by around 15%. The current difference between these yields point to a stock price that is on the high side, but probably still reasonable.

The stock price testing is gives some mixed results, but there is nothing that says the stock is overbought. There is a problem with the dividend yield test as dividends fluctuate on oil and gas companies. The next best test is the one for P/B Ratio and this shows the stock is cheap.

When I look at analysts' recommendations, I find lots in the Hold recommendation category and a couple in the Underperform category. The consensus would be a Hold. The 12 months stock price is $31.60. This implies and 12 month total return of 6.29% with 3.89% from dividends and 2.40% from capital gains.

A number of analysts feel that the current dividends are safe. They talk about the company having enough cash flow to keep current dividends. Others talk about the oil sector being out of favour at this point in time. A Financial Post article says Husky reported a 16% rise in fourth-quarter net profit as cheaper crude oil fattened refining margins. An iPolitics article talks about Husky missing the analysts estimates for the 4th quarter of 2012.

I think that the relative stock price is reasonable. It would be a contrarian pick, but the point in being a good investor is to buy stocks lower and you sell them. To do this, you obviously have to buy when others are not.

This company is one of Canada's largest energy and energy-related companies. The Company's operations include the exploration, development and production of crude oil and natural gas. Husky has operations in Western Canada, Eastern Canada, US, China, Indonesia and Greenland. This company is mostly foreign owned. Industry: Oil and Gas (Integrated Oils). It is listed under TSX Energy Index. Its web site is here Husky. See my spreadsheet at hse.htm.

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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