Fund managers buying these energy stocks as M&A activity heats up
Daily roundup of research and analysis from The Globe and Mail's market strategist Scott Barlow
BMO E&P analyst Jeremy McCrea identified the stocks institutional investors are buying in the sector,
'With the latest 13F and AMR ownership filings, we look at every fund that has reported a holding of at least one Canadian E&P since 2023 (approximately 5,800 funds). As global commodity prices and economic uncertainty continued, this group of funds sold $0.9 billion worth of CDN E&P companies; while still buying $0.1 billion of CDN mid-cap names … Bottom line, names that came up multiple times in our checklist criteria this quarter include Surge, Tamarack Valley, Topaz, Peyto and Headwater. 1. What 'energy-weighted' specialty funds are buying/selling. Typically, these funds are early movers and closer to company management including field-level operations (of the 29 high-energy focused funds we track). The top names held by these energy funds are ARC (Restricted), Tourmaline, Topaz, Advantage, and Headwater (with Peyto and Paramount new to the list). 2. What were the best-performing E&P stocks in 1Q25; which institutional funds had the foresight to buy these names in the preceding quarter, and what are these funds buying today? Collectively, these funds are now buying Whitecap, Topaz, and MEG (Restricted) … We highlight the names that have seen the most 'new buyers.' Names to highlight include Topaz, Baytex, Spartan Delta, and Whitecap'
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Also in the energy sector, RBC Capital Markets head of global energy research Greg Pardy assesses the importance of Strathcona Resources' (SCR-T) bid for MEG Energy (MEG-T),
'Strathcona Resources—Bold + Strategic. As framed in Strategically Bold, Strathcona's $2.84 billion Montney disposition and subsequent takeover bid for MEG constitutes a bold strategic thrust aimed at building a first-quartile oil sands producer that would afford quality scale, increase its float shares outstanding (currently 20% of outstanding shares) and enhance its portfolio. The company's 2026 pro[1]forma MEG outlook screens well financially. Cenovus Energy—Most Logical Fit. In our minds, Cenovus would be a logical acquirer of MEG given the proximity of its Christina Lake operations and potential for operating synergies beyond overhead/ cost savings that could be accretive to our 2026 pro-forma scenario analysis (using a 50/50 debt/equity financing structure). Timing would be less ideal given that Cenovus is completing a major capital cycle in 2025 aimed at adding up to 150,000 boe/d of production in 2026 and beyond and undertaking initiatives to improve its US refinery performance. Nonetheless, where there is a will there is a way, and we think this could involve the sale of assets as a partial funding source, possibly Cenovus' Liwan field in the South China Sea. Imperial Oil—Possible. Imperial is in an enviable position to acquire given its premium relative cash flow multiple and strong balance sheet (hence a potential 50/50 equity/debt financing scenario). The company's 2026 pro-forma MEG scenario looks solid by our yardstick, while strategically, a deal could complement its upstream portfolio with top-quartile SAGD operations'.
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Morgan Stanley cross asset strategist Serena Tang is impressed that the global economy has avoided recession and favours U.S. equities for the remainder of 2025,
'The global economy is not in a recession: Despite unprecedented policy uncertainty, the global economy is still in expansion mode, albeit with slowing growth. Off-ramps for de-escalation of trade tensions exist and we expect that tariffs will not end at the extreme levels in the aftermath of Liberation Day. Substantial monetary easing is ahead along with the benefits of deregulation. US assets remain compelling versus the RoW: US Treasuries, equities, and credit outperform their RoW counterparts on our forecasts. We push back against the idea that foreign investors would or should abandon US assets significantly, although we expect greater currency hedging. Persistent USD weakness: We expect USD to continue to weaken thanks to both a convergence in US rates and growth to peers … We roll forward our S&P 500 price target of 6,500: We've already experienced rolling earnings recessions across the equity market for the last ~3 years. This makes comparisons less onerous and sets the stage for a more synchronous EPS recovery over the course of our forecast horizon. We see 2025 EPS of US$259 (7% growth), 2026 EPS of US$283 (9% growth), and 2027 EPS of US$321 (13% growth)'
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Diversion: 'Supercharged Antibodies: Scientists Engineer Potent New Weapon Against Cancer' – SciTechDaily
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