The Crescent Fund invests on a fundamental value basis. It seeks to provide returns by buying the shares of companies that it considers are undervalued by the market. Here we look at 5 of its recent buys, and discuss if it could have invested differently:

Canadian Natural Resources Limited (CNQ): Shares are trading around $31.50 at the time of writing, as against their 52-week trading range of $25.69 to $52.04. At this share price the company’s market capitalization is $34.72 billion. Earnings per share last year were $1.14, and the shares trade on a price to earnings multiple of 27.79. The company paid a dividend to shareholders of $0.36 last year, a yield of 1.20%.

The price of natural gas has been held back over recent years as shale gas production has increased supply, and margins at the main exploration companies may be held back as economic malaise limits demand. With Canadian Natural Resources’ gross margin of 56.47% converting to an operating margin of 16.84%, the company holds up well against its main competitors. Encana (ECA) has a better gross margin (60.90%), but high overheads work this down rapidly to 10.25% at the operating level. Whilst Suncor Energy (SU) and Imperial Oil (IMO) both have operating margins of around 13.5%, Suncor benefits from gross margins of 47.26% versus Imperial’s more meagre 21.35%. With a better mix of oil, petroleum, and gas in its business structure than both Canadian Natural Resources and better gross margins than Imperial Oil, I think Suncor Energy is the better buy of the three.To continue reading, click here