Q: I have held MX for a few years and watched it bounce up and down and have never been smart enough to take advantage of its cyclicality and sell on its way up. Its currently at the lower end of its trading band. If it were you, would you wait for the next leg up to sell and move into CNQ or would you make the trade now? My hesitancy is that MX would appear to have a much higher short/medium term potential than CNQ and I would hate to miss that,
Thanks
Scott
Thanks
Scott
5i Research Answer:
Such predictions are of course hard to get accurate. MX is very cheap right now at 9X earnings. If we look at consensus, analysts do expect lower earnings (slightly) this year and next year. Unless the global economy picks up, investors may stay on the sidelines here. EPS did beat estimates last quarter. Sentiment is low, and any positive news could have an amplified impact. But, much of the same could be said of CNQ, and it is also cheap. It also offers a much better dividend. Essentially, this is a timing question. One could try and trade the cyclicality of MX, or get a quality, larger company with a better dividend and more safety in CNQ. We would be fine making this switch, considering all of this plus momentum factors as well.