Pro Picks: 3 Commodity Stocks with M&A Twist
Investment ideas from Cole Smead of Smead Capital Management
Pro Picks: 3 Commodity Stocks with M&A Twist
Watch full episode: Cole Smead of Smead Capital Management did not hold back in his return to In the Money with Amber Kanwar. After presciently suggesting MEG Energy could be a takeout candidate in March, he returns to the show and drops another combination he could see by year end. He explains why he thinks commodities, including Canada’s energy sector, are going to outperform the S&P 500 over the next five years.
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Strathcona Resources (STRC CN)
“Adam Waterous is playing chess while everyone else is stuck on checkers.”
Strathcona, a rising private oil sands powerhouse, is making bold moves—and Cole sees it as the standout operator in Canadian energy today.
Why it’s a Buy
• Smart asset rotation: Selling gas at highs, buying oil at lows—Waterous is capitalizing on commodity dislocations.
• Founder-led advantage: Fast decision-making, disciplined capital structure, and skin in the game.
• Strong capital returns: Less bloated executive comp = more dollars flowing to shareholders.
M&A Angle
• MEG Energy (MEG CN) acquisition incoming: Cole is convinced the deal gets done—likely at a 12%+ premium.
• Public float strategy: MEG gives Strathcona the liquidity it needs to scale into public markets.
• If not MEG, someone else: Strathcona is sitting on fresh cash and has Vermilion’s assets in its sights.
Cenovus Energy (CVE CN / CVE US)
“The market’s ignoring optionality—and that’s your entry point.”
Cenovus has lagged its peers, but Cole believes it’s set up for a re-rating or a full-on corporate reset.
Why it’s a Buy
• Strong upstream, weak narrative: Solid oil sands assets are being dragged down by downstream drag.
• Catalyst on deck: Major shareholder Li Ka-shing’s standstill expires this year—opening the door for corporate action.
• Valuation mismatch: The stock reflects no value (or negative value) for its downstream business.
M&A Angle
• Suncor (SU CN / SU US) could make a move: Cole sees a 35% chance Suncor acquires Cenovus in an all-stock deal.
• Refinery spinout: The U.S. downstream assets could be spun into a separate listing, backed by Elliott Management.
• Li Ka-shing holds cards: Two board seats and big equity exposure mean his team can push for a deal if CVE continues to lag.
Glencore PLC (GLEN LN)
“When commodities become a small-g god, Glencore becomes a big one.”
Glencore is Cole’s pick for investors who want hard assets with upside—especially with sentiment this negative.
Why it’s a Buy
• Coal dominance: ~40% of revenue from thermal and steelmaking coal—both still core to global energy.
• Real asset leverage: These are long-cycle, irreplaceable mines with durable returns.
• Mispriced & hated: Trades cheap despite generating 10% ROIC through the cycle.
M&A Angle
• Rolling up coal: Glencore is expected to continue consolidating smaller players globally.
• Spinout watch: Its thermal/met coal business could be spun off to unlock value—post-TECK Elk Valley deal.
• Built for action: With liquidity and M&A DNA, Glencore is ready to strike when others hesitate.
Disclaimer: The information provided in this podcast is for informational purposes only and does not constitute financial, investment, or professional advice. The views expressed by the host and guests are their own and do not necessarily reflect the opinions of any organization or company. The host and guests may maintain positions in any securities discussed on the podcast. Always consult with a qualified financial advisor or professional before making any investment decisions.
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