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Cenovus Energy Inc. (CVE)
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Ovintiv Inc. (OVV)
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Brookfield Corporation Class A Limited Voting Shares (BN)
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Brookfield Asset Management Ltd. Class A Limited Voting Shares (BAM)
Q: What is your opinion on the prospects of Cenovus(CVE) and Ovintiv(OVV) over the next 5 and 10 years ? What are your thoughts on selling them (old stocks that could be sold for a tax loss) and replacing them, as a long-term hold, with some Brookfield stock (BN, BEP and/or BIP)? If you favor that, which Brookfield company would you recommend be given the greatest weight ? Or is it better to hold onto those oil and gas stocks for a while?
5i Research Answer:
Similar to other oil companies, the prospect of most oil companies going forward will depend largely on oil prices, which are highly volatile. Having said that there is currently a supply-demand mismatch of oil where oil producers are not incentivized to drill due to political and ESG pressures, and demand for oil continues to gradually increase. Consequently, we think long-term oil prices should be okay.
Having said that, we also like the majority of Brookfield entities, especially BN (long runway for reinvestment) and BAM (capital-light asset manager).
We would be comfortable holding both as they are not an apples-to-apples comparison, but if we HAVE TO pick one, we would side with BN and BAM.