# Any Canadian stocks looking set for good growth this quarter?



## indexxx (Oct 31, 2011)

I thought it might be interesting to start an ongoing thread for Canadian stocks. With so many focussed on tech gains etc in the US, how about prospects in our own backyard?


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## PMREdmonton (Apr 6, 2009)

The topic is a bit too broad, IMO. You'll have to at least narrow it down to a sector or market cap.

Some of the growth stories that I am interested in are CTW (Catch the Wind), MQL (Marquee Energy), GFP (Gale Force Petroleum), Westport Innovations (WPT), Gran Tierra Energy (GTE), Nevsun Resources (NSU), Pan American Silver (PAAS), PSN (poseidon concepts), LLL (Lululemon Athletica), CMG (Computer Modeling Group) and any of the frackers (TCW, FRC, CFW) but especially Gasfrac (GFS).

For anyone interested in Gasfrac there are some interesting articles about it on Seeking Alpha. This is a potential 10-bagger IMO and represents a game changing technology. This is a small company out of Calgary that was started by an engineer from Chevron. Chevron had developed a propane gel called LPG but didn't have much applications for it. This engineer had the idea of using it for fracks in the unconventional oil plays. He worked a deal with Chevon where they could have exclusive North American rights to use LPG and then started up this company called Gasfrac and have worked over several years on a proprietary technology for using LPG for fracks. 

The advantages seem to be:

1. There is no need for water. One of the biggest environmental concerns for hydraulic fracks is that it uses many millions of gallons of water. This creates a huge problem because many of the unconventional oil plays occur in drought stricken areas. This means that most of the companies have to hire truck fleets to bring in water for them at huge expense.

2. There is no need for water disposal due to point #1.

3. There is no need for the toxic hydraulic frac fluids.

4. There is no need to dispose of the toxic hydraulic frac fluids.

5. LPG creates longer effective fracture lengths than hydraulic fracs.

6. It appears to increase flow of hydrocarbons by about 50%.

7. It appears to increase recoverable reserves by about 25% but more work is needed on this area.

8. There are several areas which have not been possible to recover oil from with other frack methods (hydraulic, CO2 stimulation, oil foam) that were successful with LPG.

9. The LPG used is more expensive than water obviously but it is recovered in the processing of the hydrocarbons and thus can be recycled. This is the case for most of the majors that have access to their own refineries. Gasfrac has almost completed the work for on-site recovery of propane for smaller companies who don't have this capacity to decrease the cost of the frac jobs.

10. They appear to be making in-roads in areas that were closed off to other frac methods. There was an article in WSJ this week about them possibly being allowed to do a job in NY which has a ban on hydraulic fracs.

11. They have signed a couple of contracts recently with other firms. One is in the US called Blackbush and the other is in Europe called eCORP. This shows industry is now accepting the results of the work and have agreed to hire them on. This is extremely important for a company with a new technology to gain acceptance in the industry.

12. They appear to be able to command a premium in pricing compared to other frac companies. The other companies are basically commoditized but GFS can extract higher margins. They initially projected $300K per frac job but actually were able to get over $500K.

13. There is the potential for signing a deal with a super major in the next couple of years. There was a recent mention in Chevron's annual report about this new process they were considering implementing and they were obviously referring to Gasfrac but did not name the company. There are rumours that Husky may hire them after Gasfrac did a job for them last quarter. There are rumours that Shell has been impressed with their work with Quicksilver in Colorado that borders one of their properties. 

14. This company still has a small market cap around $700M. There are major players in this industry that could try to buy them out at a high multiple of sales if they execute well for another year or two. I am referring to deep pocketed companies such has Haliburton which would obviously want to defend their position in the frac world. They would have the ability to role out this process with large economies of scale and thus such an acquisition could benefit both parties. Interestingly, Gasfrac's newly hired CEO is a former HAL executive who apparently came out of retirement to help build this company because he strongly believed in the technology. He naturally brought in lots of contacts and organizational and executional expertise that were lacking in a board that mostly consisted of scientists and engineers who were focused on developing the process for LPG fracs.

15. They have a few patents and several other patents pending approval. No one else will be able to easily follow the same path once their IP is recognized so there is little chance that they will become commoditized.

16. They have an excellent safety record.

17. They have expanded their sets to 8 working sets and will be up to 10 by the end of the year. The combination of these new sets coming on-line and higher rates of utilization of their sets is about to cause a huge ramp-up of earnings. They had an earnings miss last quarter due to apparent 3rd party delays at getting their job with Husky done which resulted in low rates of utilization in the last quarter. They also were dealing with very low rates of utilization of their existing sets because they had been mostly in a demonstration phase in various parts of the country to show the oil companies how their process worked and collect the data to show the superiority of their results. According to their last conference call they are now going to focus on getting all the sets going at higher rates of utilization which will result in a huge bump in revenues and earnings.

Any of you who want to get on-board this one should buy soon as the company's name has been getting into the press more and more with the two new contracts signed and the WSJ article. They missed on earnings about 2 weeks ago and this caused the stock to crash from 8.00 to 6.25. However, it quickly bounced back up to 7.00. Then the news came in about them pursuing the US job in NY with eCORP but this was fairly low-key news on Friday and the stock jumped. Now with the WSJ article yesterday I wouldn't be surprised if we see a parabolic move up as the investment community comes to understand what this company is, what their future potential is and why that earnings miss was a golden opportunity to accumulate.

So this is the growth stock in Canada that I like best right now. It is 5% of my portfolio and I am resisting the urge to bump up to 10%.


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## Islenska (May 4, 2011)

I have been keen on Cameco (CCO) but bought recently and has been down 8%. The fundamentals for uranium seem compelling and it is down huge from last year the Japanese tsunami. It pays a small dividend so will stay invested----for the long term!


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## PMREdmonton (Apr 6, 2009)

I bought some around 24. I have no intention of selling as this is a long-term hold for me. I'm not sure how much growth there will be with this one. The main thing would actually be an increase in spot price of Uranium. However, you have to keep in mind that they tend to hedge most of their uranium with long-term contracts so they don't stand to gain much if uranium spot prices increase. I think there are better plays on that elsewhere.

I do think the future of uranium is very bright as a bridge to renewable energy such as wind, tidal, biomass/algae/biodiesel and solar. The treaty whereby decommissioned Russian nuclear warheads have their nuclear material removed and sold to the electrical utilities is set to expire and will not be renewed at which point there will be a significant uranium shortage at present levels of production and not accounting for the new power plants coming online in India and China which dwarf the alleged future reductions in power plants in Germany and Japan.


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