Here’s Why L1 Capital is Bullish on Cenovus Energy (CVE)

L1 Capital, an independent investment management firm, published its fourth quarter 2020 “L1 Long Short Fund Limited” investor letter – a copy of which can be downloaded here. The Company’s NTA increased 34.4% for the quarter (ASX200AI +13.7%) and 29.5% for the 2020 calendar year (ASX200AI 1.4%). You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.

L1 Capital, in their Q4 2020 investor letter, mentioned Cenovus Energy Inc. (NYSE: CVE) and emphasized their views on the company. Cenovus Energy Inc. is a Calgary, Canada-based natural gas company that currently has a $15.8 billion market capitalization. Since the beginning of the year, CVE delivered a 29.14% return, impressively extending its 12-month gains to 361.54%. As of March 26, 2021, the stock closed at $7.80 per share.

Here is what L1 Capital has to say about Cenovus Energy Inc. in their Q4 2020 investor letter:

Cenovus Energy (long +49%) is an integrated energy company that develops, produces and markets crude oil, natural gas liquids and natural gas, primarily in Canada. Cenovus shares rose as the oil prices continued to recover and as discounts for their production compared to the WTI price narrowed, driving strong free cashflow generation in Q4 after very weak Q2 and Q3 performance. We increased our shareholding after Cenovus announced the acquisition of Husky Energy in late October 2020, to create the third largest Canadian oil and natural gas producer. We see strong strategic merit in the combination which unites high-quality and low-cost oil sands and heavy oil assets with extensive midstream and downstream infrastructure. The transaction should be highly accretive and lead to substantial synergies, increased scale, more stable cash generation and reduced group leverage.”

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Our calculations show that Cenovus Energy Inc. (NYSE: CVE) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Cenovus Energy Inc. was in 23 hedge fund portfolios, compared to 18 funds in the third quarter. CVE delivered a 32.20% return in the past 3 months.