Canada Markets closed
  • S&P/TSX

    21,284.84
    +68.69 (+0.32%)
     
  • S&P 500

    4,566.48
    +21.58 (+0.47%)
     
  • DOW

    35,741.15
    +64.13 (+0.18%)
     
  • CAD/USD

    0.8076
    -0.0003 (-0.0363%)
     
  • BTC-CAD

    78,085.03
    +1,826.70 (+2.40%)
     
  • CMC Crypto 200

    1,512.29
    +1,269.61 (+523.17%)
     
  • GOLD FUTURES

    1,807.10
    +0.30 (+0.02%)
     
  • RUSSELL 2000

    2,312.64
    +21.37 (+0.93%)
     
  • 10-Yr Bond

    1.6350
    -0.0200 (-1.21%)
     
  • VOLATILITY

    15.24
    -0.19 (-1.23%)
     
  • FTSE

    7,222.82
    +18.27 (+0.25%)
     
  • NIKKEI 225

    29,026.06
    +425.65 (+1.49%)
     
  • CAD/EUR

    0.6957
    +0.0004 (+0.06%)
     

2 Top Energy TSX Stocks to Buy As the Oil Rally Heats Up!

  • Oops!
    Something went wrong.
    Please try again later.
·3 min read
In this article:
  • Oops!
    Something went wrong.
    Please try again later.
Oil pumps against sunset
Oil pumps against sunset

Written by Vineet Kulkarni at The Motley Fool Canada

Many of us were disdainful of the energy sector, given its underperformance for years. However, since the pandemic crash last year, it has emerged as one of the top-performing sectors. The TSX Composite Index has been up 55% since last March, while energy TSX stocks at large have gained approximately 190%!

Crude oil and natural gas prices have been largely upbeat for months, driven by demand recovery amid re-openings. Most recently, falling U.S. inventories of oil on the back of Hurricane Ida pushed energy commodities higher.

Among all the supporting factors, another big trigger for energy markets could be the newly issued bullish demand outlook. Major oil forecasters, including OPEC, are quite optimistic about the pace of oil demand growth. It expects global oil demand to reach 100.15 million barrels by the second quarter of next year, the highest levels witnessed in 2019.

This could be highly bullish for energy producers because the recovery has been faster than expected. However, the pandemic drove investments to renewables, and it was once feared that oil demand might never reach its pre-pandemic levels.

So, if you want to play the potential energy rally, some TSX energy stocks are still trading far lower than their fair values. Here are two of them.

Canadian Natural Resources

Canada’s biggest energy stock Canadian Natural Resources (TSX:CNQ)(NYSE:CNQ) has returned 60% this year. Oil price recovery and record production notably boosted its earnings this year. For the first half of 2021, the company posted a net income of $2.92 billion against a loss of $1.6 billion in the same period last year.

Interestingly, CNQ will likely continue to report superior earnings growth for the second half of 2021, mainly due to the low base effect. In addition, encouraging demand outlook should fuel crude oil prices, further aiding energy companies’ bottom lines.

CNQ stock yields a safe 4.4% at the moment. Its robust balance sheet should fuel consistently increasing dividends. Besides, CNQ stock does not look expensive from a valuation standpoint. It is currently trading 10 times its 2021 expected earnings, representing a large discount.

So, for those who have missed the earlier rally in CNQ, it’s still not too late. Investors can expect decent gains driven by CNQ’s strong earnings growth prospects and stable dividends.

Whitecap Resources

Many energy stocks have seen massive recoveries since last year. Whitecap Resources (TSX:WCP) is one of them. It is currently trading at $5.9 for a gain of nearly 650% since March 2020.

Whitecap Resources has been firing on all cylinders with superior earnings growth, strategic acquisitions, and dividend increases this year. So far this year, it has acquired NAL Resources, TORC Oil & Gas, and Kicking Horse Oil & Gas. Higher production, mainly after these acquisitions coupled with rallying commodity prices, will likely continue to boost its bottom line.

WCP stock is currently trading seven times its earnings, which is notably discounted. Investors can expect handsome total returns that were driven by steady capital growth and stable monthly dividends.

The post 2 Top Energy TSX Stocks to Buy As the Oil Rally Heats Up! appeared first on The Motley Fool Canada.

The Motley Fool’s First-Ever Cryptocurrency Buy Alert

For the first time ever, The Motley Fool has issued an official BUY alert on a cryptocurrency.

We’ve taken the exact same detailed analysis that we’ve used to find world-beating stocks like Amazon, Netflix, and Shopify to find what we believe will be the ONE cryptocurrency to rise above more than 4,000 cryptocurrencies.

Don’t miss out on what could be a once-in-a-generation investing opportunity.

Click here to get the full story!

More reading

The Motley Fool has no position in any of the stocks mentioned. Fool contributor Vineet Kulkarni has no position in any of the stocks mentioned.

2021

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting