Brock Ladenheim is a reporter with TipRanks
Following 2020′s tumultuous year, many hoped 2021 would bring a greater sense of tranquility to their portfolios. While major indexes ended the year with large gains, following that journey was not as simple as it might have seemed.
Several nerve-wracking macroeconomic trends and forces swung markets day-to-day, causing traders to sell off assets and shift their strategies on the fly. Among those trends were the change in tone in the U.S. Federal Reserve’s monetary policy, all sorts of bubble-like activity in electric vehicle and cryptocurrency firms, and massive resurgence in e-commerce and general consumer demand causing component shortages and disrupting shipping logistics.
On top of all of this, the COVID-19 pandemic persisted in permeating through global society and dictating governmental responses. The year began on a strong note for energy and oil producers as economies reopened and travel increased, yet several waves of mutated coronavirus variants kept a damper on the return to normalcy.
In the third quarter of the year, oil prices were soaring week after week. Then came the Omicron variant, which has caused more lockdowns and slowdowns in global economic activity.
For the everyday investor, these forces can seem unpredictable and difficult to navigate. That’s where professional analysts come in. However, while their hypotheses are supported by facts, they do not always turn out to be perfect. Finding the most accurate analyst predictions is crucial to anyone’s due diligence research.
Financial data aggregation company TipRanks has a tool that provides rankings of analysts and their stock picking accuracy.
Collectively, the 618 analysts covering Canadian stocks have averaged a success rate of 54.12 per cent and have returned an average of 2.8 per cent per rating. These metrics are far below the performances of the top 25 Canadian analysts, who have succeeded 81 per cent of the time, and averaged returns of 15.60 per cent on each rating.
(The success rate is how often an analyst’s buy rating turned out to be correct during the year; average returns are how much a particular analyst’s buy ratings gained or lost on average.)
Backed by the data, we at TipRanks put together a list of the top five performing Canadian analysts, ranked by a weighted calculation of their success rates and average return percentages. Their performances are based on rolling three-month periods throughout 2021.
Stifel Nicolaus, Robert Fitzmartyn
This year, it was Stifel Nicolaus’ Robert Fitzmartyn who took the top spot on our list. The Managing Director and Head of Energy Research at Stifel FirstEnergy has leveraged his chemical engineering degree to successfully rate Canadian energy and petroleum stocks.
Mr. Fitzmartyn did not reach this position out of nowhere. Before his tenure at Stifel, Mr. Fitzmartyn worked professionally as an engineer at a high-profile oil and gas company, later moving on to apply this knowledge to his financial work at FirstEnergy Capital Corp. prior to its absorption by Stifel.
These factors have led Mr. Fitzmartyn to reach an impressive success rate of 84 per cent, a level any investor would aspire to. Furthermore, after averaging his ratings, we found they yielded returns at a rate of 19.8 per cent. While this metric is an amalgamation of a year’s work well done, one may be left wondering, what was his most successful rating in 2021?
From February 19 until May 5, Mr. Fitzmartyn netted the highest return of any analyst on our list. Placing a Buy rating on Gear Energy Ltd. (GXE-T), the analyst let it run until reaching an eventual upside of 114.70 per cent, a massive gain despite oil prices rising merely a fraction of that over the same time period. At that point, he downgraded his position to Hold, whereafter the stock fell some 13 per cent over the next week.
Since then, Mr. Fitzmartyn has returned to taking a bullish stance on Gear. In a recent interview on the macro situation facing global energy, he noted that while OPEC and governments may attempt to swing oil and energy prices to their liking in the near-term, ultimately it will be market forces that dictate the commodity pricing in the long-term.
Moreover, he mentioned that continued lockdowns are an issue, although he stated that “anytime we communicate a steady disciplined plan and stick with it, the market will like that.”
Canaccord Genuity, Anthony Petrucci
A Director and Analyst at Canaccord Genuity, Anthony Petrucci has been focusing on oil and gas stocks ever since his start at the firm in 2013. He wields vast knowledge on the sector, due in part by his earliest professional work as a founding member of an oilfield services corporation. Additionally, Mr. Petrucci gained financial footing while on the buy side with a Calgary-based investment management company.
Following these endeavors, he moved into life as an analyst employed by a bank-owned dealer, and researched Canadian small to medium energy and petroleum companies.
Mr. Petrucci’s long-standing career in finance has not left him empty handed when it comes to rating stocks. The Canaccord analyst pulled off a 79-per-cent success rate, as well as an average return of 20.8 per cent. While not the highest metrics on our list, these solid results weighted together were enough to boost Mr. Petrucci to the second-to-top spot.
For Mr. Petrucci, it was not just his averages that stood strong. His most profitable rating was with petroleum and natural gas firm InPlay Oil Corp. (IPO-T). It commenced on March 18, and concluded on June 18, clocking in a soaring 96.50 per cent. The trade far outpaced the broader oil industry, and indicated consistently strong results from the company.
In a report, Mr. Petrucci stated he was encouraged by outperforming drilling wells dredging up record volumes of product, as well as properly managed and redirected capital. The analyst detailed the robust performance by InPlay, and noted that rising oil prices are aiding to its healthy levels of free cash flow.
RBC Dominion Securities, Michael Harvey
Coming in third place on our list of high performers is the Managing Director of Equity Research at RBC Dominion Securities. Michael Harvey has worked his way up the proverbial food chain, having spent over 14 years at RBC in various management positions.
Prior to his entrance into the world of finance, Mr. Harvey spent time using his mechanical engineering degree at firms Imperial Oil Ltd. (IMO-T) and Canadian Natural Resources Ltd. (CNQ-T). At these companies, he was employed as a subsurface and production engineer, respectively.
Thanks to his long-standing career in the energy sector, Mr. Harvey has been fruitful in picking Canadian stocks poised for upside. His standalone success rate is the highest on our list, coming in at a whopping 90 per cent. Being correct that frequently isn’t something most folks are capable of, and has the potential to bring with it high profits. His average return per rating came in at 25.7 per cent, beating out both the Dow Jones Industrial Average and the Nasdaq Composite indexes.
However, not all stock ratings are made equal. Mr. Harvey’s most profitable rating was his three-month run with Storm Resources Ltd. (SRX-T), about which he was bullish, starting August 16. By November 16, the stock had gained 83.10 per cent, and soon thereafter announced an acquisition by CNRL at a specified valuation.
In a recently published report, Mr. Harvey noted that Storm should continue to outperform its peers. This is due in part to its successes in accumulating acreage in British Columbia, as well as Storm’s management’s strong reputation for returning value to shareholders.
Canadian Natural Resources completed its takeover of Storm in December 2021, and due to its high exposure to oil and gas commodity prices, the company will most likely see increased gains in valuation if demand continues to trend upward.
Raymond James Financial, Jeremy McCrea
The Director of Equity Research covering Canadian energy companies at Raymond James took fourth place in our data-driven ranking. His financial background goes far beyond his current position.
Before his six year and four month stint at the investment bank, Jeremy McCrea spent four years as an analyst at J.F. Mackie & Company, two years as an associate at National Bank Financial, and then nearly five years as Director Equity Research at AltaCorp Capital Inc.
All of this financial experience has surely aided Mr. McCrea in rating stocks, as his choices were overwhelmingly correct. The analyst clocked in an 81-per-cent success rate, and returned an average of 20.6 per cent on each one. For Mr. McCrea, one rating in particular stood out from the crowd.
As the global economy continued to reopen and vaccine effectiveness still permeated optimism into governments, the demand for oil rose with it. Picking any oil- or energy-linked stock is one thing, but choosing the one that will far outperform its sector is another. Mr. McCrea succeeded in the latter, assigning a Buy rating to Baytex Energy Corp. (BTE-T) on July 29.
His timing was impeccable, as three months later the stock had climbed 94.20 per cent. Soon thereafter, the Omicron variant of COVID-19 shook fear into investors and governments, causing a sharp drop in oil stock valuations. Baytex has yet to recover from the selloff, yet Mr. McCrea maintains his bullish outlook.
In his most recent report on the stock, the analyst elaborated that “valuation is still relatively attractive given the Company’s assets and the improving debt situation. Overall, we expect the Company (and share price) to build momentum as the consensus begins to price in the high impact of Clearwater success (that we believe is still understated).”
Mr. McCrea went on to articulate that Baytex’s ownership of heavy oil properties reduces its risk of exposure to spot oil prices.
TD Securities, Aaron Bilkoski
Making his way into the last place of our grouping is an Oil & Gas Equity Research analyst, Aaron Bilkoski. He has been over at TD Securities for about 12 years and four months, giving him ample time to focus on his field of expertise.
Before taking on his current role, Mr. Bilkoski was employed for three years as an Associate at Salman Partners Inc., which was his first professional role after graduating from the University of Calgary.
The Calgary-based analyst has been putting his knowledge to work when rating stocks, and it shows. His success rate stands at an impressive 81 per cent, with a 17.9-per-cent average return to boot.
Once again, the energy sector’s recovery has boosted one of its established player’s stock along with it. In Mr. Bilkoski’s case, the most profitable energy stock he recommended was Advantage Energy Ltd. (AAV-T), which climbed upwards to a considerable gain. Between March 1 and June 1, Mr. Bilkoski stayed bullish on Advantage, and for good reason. The stock rose 70.10 per cent during that period, and has continued its onward march since then.
In response, Mr. Bilkoski has kept his positive projections for the company and confidently continued rating it a Buy.
In late November, Mr. Bilkoski authored a report which argued that around Thanksgiving, demand for gasoline already sat “above the top-end of the five-year historical band.” Additionally, he added that retail gas prices were the highest they had reached in seven years, while wholesale prices have remained lower due to their lower marketing and blending costs.
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