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EnerVest fund loads up on oil services stocks

swon@globeandmail.com

What are we looking for?

What's catching the eye of the fund pros.

It pays to check out their top holdings to get stock ideas or to do research on their fund. Today, we will look at EnerVest Natural Resource Fund at canoefinancial.com.

More about the fund

The $40-million natural resource equity fund has been managed by Rafi Tahmazian of Canoe Financial LP since January, 2010. The fund posted a 52.8-per-cent gain for the year ended April 30, compared with the 27.4-per-cent average for its peers.

This fund, which is now only invested in the energy sector, is expected to be merged with Canoe Canadian Energy Class, also run by Mr. Tahmazian. The manager, who focuses on junior, intermediate and private energy firms, said the companies that he has bought can do well in an oil-price environment of between $75 (U.S.) to $90 per barrel.

Mr. Tahmazian is upbeat on the domestic energy sector over the medium term because of rising demand by emerging markets, and because oil companies from countries such as China, South Korea and India are looking at Canada to buy new reserves. "They are looking at the mid-caps as well - not just the large caps," he said.

Since October, he has been seeing opportunities in oil services stocks, where his fund is over 50-per-cent invested. Because energy companies are ramping up their capital-expenditure programs amid a scarcity of drilling equipment, oil service firms will have to increase rates, and that will boost their profitability, he said.

What did we find?

Double and triple-digit gains among most holdings over the past year.

RMS Systems, which has gained nearly 500 per cent from penny-stock territory, is a "very speculative" venture with further potential, Mr. Tahmazian suggested.

RMS, a newcomer in producing electronic drilling recorders that are attached to oil rigs to transmit data, is trying to break into a business dominated by global leader Pason Systems Corp., he said.

While the two firms differ in that Pason uses satellite communications and RMS employs cellular transmission, "it is in the oil companies' best interest to encourage competition" to keep pricing for such devices competitive, he said. RMS's clients such as Canadian Natural Resources Ltd. and Celtic Exploration Ltd. "are reputable oil producers that give this business credibility," he added.

There is also more upside to Secure Energy Services Inc., which is focused on the growing waste-management business that is being outsourced by the oil and gas sector, he said. Secure is starting to make small inroads into the business dominated by CCS Corp. and Newalta Corp., he added. His one-year target on the stock is $11 to $12 a share.

Shares of Badger Daylighting Inc., a waste-disposal company, lost some steam recently when its shareholders voted against a takeover bid by Clean Harbors Inc., but "I think there is strong potential for this one to go back into play," Mr. Tahmazian suggested. His one-year target is $23 to $24 a share.

****

TOP EQUITY HOLDINGS FOR ENERVEST NATURAL RESOURCE FUND AT APRIL 30

Company nameSymbol$ Price (May 25)52-wk high $52-wk low $YTD % price chg1-yr % price chg3-yr % price chgYield %P/EMarket cap ($-mil)Volume
Technicoil Corp.TEC-T2.142.620.7044.6205.763.4014.3155.7847,106
Badger DaylightingBAD-T19.6421.5012.482.835.0-15.55.211.5212.416,978
Compass Petroleum Ltd.CPO-X1.812.300.7820.750.8-79.90n/a0.423,100
Horizon North LogisticsHNL-T4.355.131.5246.5141.727.93.617.4459.5452,406
Logan International Inc.LII-T7.107.984.5035.257.880.2059.2236.3n/a
PHX Energy ServicesPHX-T12.2716.397.40-7.957.1-17.0420.8331.414,106
Artek Exploration Inc.RTK-T2.003.110.9251.547.1-90.40n/a66.2116,849
Strad Energy Services *SDY-T4.755.253.4523.1n/an/a013.6176.912,800
Secure Energy ServicesSES-T8.658.953.3147.9140.3n/a0123.6551.5684,279
Eagle Energy Trust *EGL.UN-T11.7212.109.7512.3n/an/a9n/a206.630,481
RMS SystemsRMS-X1.101.100.19182.1479.0361.40n/a29.2191,927
* Company went public in late 2010. Source: Globe Investor

© 2007 The Globe and Mail. All rights reserved.

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