Tuesday, June 2, 2015

Husky Energy Inc. 2

Sound bite for Twitter and StockTwits is: Stock price is cheap on a number of tests. This is a resource stock and to my mind it is not a long term hold. However, I am sure there will be still many years that we will be using oil and so there is still time to make money from oil resources. The problem is that no one knows when the price of oil will recover. But the time to buy good companies is when they are relatively cheap. See my spreadsheet at hse.htm.

I own this stock of Husky Energy Inc. (TSX-HSE, OTC-HUSKF). When I sold some of my SNC-Lavalin in 2008, I was looking for something to buy. With this purchase, I only used a third of the money I got from my SNC sale, but got enough dividends on this to replace the dividends I will lose from my SNC sale.

When I look at insider trading, I find a bit of insider buying and no insider selling. Ka-Shing Li and Hutchison Whampoa Luxembourg Holding own substantial amounts of Husky's shares, 40 and 30% for a total of 70% of outstanding shares. Hutchison Whampoa Luxembourg Holding is wholly-owned by Hutchison Whampoa Limited. Mr. Li Ka-shing is the Chairman of Hutchison Whampoa Limited.

Outstanding shares were increased by 44,000 shares for stock options. This amount shows up a 0% of outstanding shares where the percentage is taken to two decimal points. In other words, this is a very small number.

The 5 year low, median and high median Price/Earnings per Share Ratios are 14.86, 16.54 and 18.22. The corresponding 10 year values are much lower at 10.27, 11.84 and 14.05. The current P/E Ratio is 53.73 based on a stock price of $24.44 and 2015 EPS estimate of $0.50. Since EPS is expected to drop almost 60% in 2015, you have to wonder how good this test is to judge the current stock price. Since a big component of the Graham Price is also based on EPS estimates, I wonder about this test also.

I get a 10 year Price/Book Value per Share Ratio of 1.68. The current P/B Ratio at 1.19 is some 29% lower. The P/B Ratio is based on a stock price of $24.44 and BVPS of $20.57. This stock price testing suggests that the stock price is relatively cheap.

The 5 year median dividend yield is 4.37%. The current dividend yield is 12% higher at 4.91%. The current dividend yield is based on dividends of $1.20 and a stock price of $24.44. This stock price testing suggests that the stock price is relatively reasonable.

The historical median dividend yield is 4%. The current dividend yield is 23% higher at 4.91%. This stock price testing suggests that the stock price is relatively cheap. However, it is still below the historical high around 5.66%.

The 10 year Price/Cash Flow per Share Ratio is 6.58. The current P/CF Ratio is 3.90 a value some 41% lower. The P/CF Ratio is based on a stock price of $24.44 and 2015 CFPS estimate of $6.27. This stock price testing suggests that the stock price is relatively cheap.

When I look at analysts' recommendations, I find Strong Buy, Buy and Hold recommendations. The vast majority of the recommendations are a Hold, so the consensus recommendations would be a Hold. The 12 month consensus stock price is $29.20. This implies a total return of 24.39% with 4.91% from dividends and 24.39% from capital gains. This total return is based on a current price of $24.44. This is a very good return for a suggested Hold recommendation.

Nelson Smith of the Motley Fool in this recent article talks about the energy patch sale and that we should take advantage of it. Matt DiLallo of the Motley Fool also likes this stock. This article in the Plant Netazine talks about Husky's profit falling 71% in the first quarter of 2015. This article in Forbes says that Husky's stock is oversold.

This is the second of two parts. The first part was posted on Monday, June 01, 2015 and is available here. The first part talks about the stock and the second part talks about the stock price.

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.

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. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.

See my website for stocks followed and investment notes. Follow me on Twitter or StockTwits.

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