Energy Stocks
Resource and commodity stocks in general should make up only a limited portion of your portfolio—say less than 20% for a conservative investor or as much as 30% for an aggressive investor. And as part of that segment, energy stocks could make up, say half of that total. The rest could be fertilizer stocks, mining stocks and so on.
Oil and gas stocks have been below-average performers lately, and many investors are tempted to get out of the industry altogether. However, the energy sector can play a crucial role in your portfolio as a hedge against inflation. The low inflation rates of the past couple of decades deserve some of the blame for the poor performance of the sector. However, energy stocks will likely rebound in years to come as the global economy recovers.
- Invest mainly in well-established companies;
- Spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources & Commodities; Consumer; Finance; Utilities);
- Downplay or avoid stocks in the broker/media limelight.
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Energy Stocks Library Archives
COMPUTER MODELLING GROUP, $4.17, is a buy. The company (Toronto symbol CMG; TSINetwork Rating: Extra Risk) (www.cmgl.ca; Shares o/s: 79.7 million; Market cap: $334.2 million; Dividend yield: 1.0%) is now buying Rose Subsurface Assessment, a provider of “probabilistic subsurface” risk analysis and resource assessment software. Rose also offers training, consulting, and operator consortium services for the global exploration and production industry. This acquisition adds to Computer Modelling’s range of services.
Oil prices immediately fell with news of a cease fire in the U.S./Israel-Iran war. We expect prices will eventually stabilize on longer-term easing of tensions and the regular movement of oil tankers through the Strait of Hormuz.
While the earlier March spike in crude oil prices lifted the shares of the three oil producers we examine here, their ongoing efforts to cut drilling and other costs should keep profits rising even after crude prices stabilize.
We continue to recommend that most investors maintain some exposure to the oil industry. You can further cut your risk with these three producers, whose high-quality reserves should last decades.
While the earlier March spike in crude oil prices lifted the shares of the three oil producers we examine here, their ongoing efforts to cut drilling and other costs should keep profits rising even after crude prices stabilize.
We continue to recommend that most investors maintain some exposure to the oil industry. You can further cut your risk with these three producers, whose high-quality reserves should last decades.
CENOVUS ENERGY, $36.92, is a buy for long-term gains. Canada’s third-largest oil producer (Toronto symbol CVE; Shares outstanding: 1.9 billion; Market cap: $69.6 billion; TSINetwork Rating: Average; Dividend yield: 2.2%; www.cenovus.com) recently completed its acquisition of MEG Energy Corp. (Toronto symbol MEG) for $4.99 billion in cash, shares and assumed debt.
MEG operates an oil sands property near Cenovus’s operations in northern Alberta.
MEG operates an oil sands property near Cenovus’s operations in northern Alberta.
Like all natural-gas-weighted producers, Birchcliff will need natural gas prices to stay high to report strong cash flow. However, we still like the long-term prospects for investors.
BIRCHCLIFF ENERGY, $7.38, is a buy. The company (Toronto symbol BIR; TSINetwork Rating: Speculative) (Shares outstanding: 274.9 million; Market cap: $2.0 billion; Dividend yield: 1.6%) develops and produces oil and gas, mainly in the Peace River Arch area of both Alberta and B.C.
BIRCHCLIFF ENERGY, $7.38, is a buy. The company (Toronto symbol BIR; TSINetwork Rating: Speculative) (Shares outstanding: 274.9 million; Market cap: $2.0 billion; Dividend yield: 1.6%) develops and produces oil and gas, mainly in the Peace River Arch area of both Alberta and B.C.
We see bright outlooks for Wajax and Computer Modelling given their high-demand services and the resulting prospects for growth. Both are buys.
WAJAX CORP., $32.48, is a buy. The company (Toronto symbol WJX; TSINetwork Rating: Extra Risk) (www.wajax.ca; Shares outstanding: 21.8 million; Market cap: $706.3 million; Dividend yield: 4.3%) sells and services cranes, forklifts and other heavy equipment. Wajax also provides related parts and systems such as ball bearings, hoses, diesel engines and transmissions.
WAJAX CORP., $32.48, is a buy. The company (Toronto symbol WJX; TSINetwork Rating: Extra Risk) (www.wajax.ca; Shares outstanding: 21.8 million; Market cap: $706.3 million; Dividend yield: 4.3%) sells and services cranes, forklifts and other heavy equipment. Wajax also provides related parts and systems such as ball bearings, hoses, diesel engines and transmissions.
SUNCOR ENERGY INC. $79 is a buy. Canada’s largest integrated oil producer (Toronto symbol SU; Conservative Growth Portfolio, Resources sector; Shares outstanding: 1.2 billion; Market cap: $94.8 billion; Price-to-sales ratio: 1.8; Dividend yield: 3.0%; TSINetwork Rating: Average; www.suncor.com) focuses on major projects in the Alberta oil sands. It also operates four refineries (three in Canada and one in Colorado), along with over 1,800 Petro-Canada gas stations.
The stock is up 7% in the past month as crude oil prices spiked with the war in the Middle East and the disruption of shipping through the Strait of Hormuz.
The stock is up 7% in the past month as crude oil prices spiked with the war in the Middle East and the disruption of shipping through the Strait of Hormuz.
ALGONQUIN POWER & UTILITIES, $9.52, is a buy. The utility (Toronto symbol AQN; Shares outstanding: 768.2 million; Market cap: $7.3 billion; TSINetwork Rating: Extra Risk; Dividend yield: 3.9%; www.algonquinpower.com) completed the sale of its 42.2% ownership stake in Atlantica Sustainable Infrastructure plc in December 2024 for $1.08 billion (all figures except share price and market cap in U.S. dollars). Algonquin also sold its non-regulated renewable energy business to LS Power in January 2025 for up to $2.5 billion. Today, Algonquin focuses entirely on its regulated utilities, which supply electricity, gas, water distribution and wastewater collection services to 32 million customers in Canada, the U.S., Chile and Bermuda.
The shares of oil and gas stocks remain high as energy demand stays strong. The emerging disruption to oil exports from the Middle East is another driver of short-term growth. We continue to recommend that most investors maintain some exposure to the oil and gas industry as part of a balanced portfolio. To cut risk, you should stick with producers that have positive cash flow even in times of low energy demand and prices. Here are two stocks that should meet that requirement. Moreover, they pay solid dividends:
ARC RESOURCES, $25.61, is a buy. The company (Toronto symbol ARX; Shares o/s: 575.7 million; Market cap: $14.8 billion; TSINetwork Rating: Extra Risk; Dividend yield: 3.3%; www.arcresources.com) produces natural gas as well as oil. Its average output of 408,382 barrels of oil equivalent per day is 58% natural gas and 42% oil.
ARC RESOURCES, $25.61, is a buy. The company (Toronto symbol ARX; Shares o/s: 575.7 million; Market cap: $14.8 billion; TSINetwork Rating: Extra Risk; Dividend yield: 3.3%; www.arcresources.com) produces natural gas as well as oil. Its average output of 408,382 barrels of oil equivalent per day is 58% natural gas and 42% oil.
DEVON ENERGY, $44.44 (New York symbol DVN; TSINetwork Rating: Average) (www.dvn.com; Shares o/s: 620.3 million; Market cap: $27.6 billion; Dividend yield: 2.2%) is now buying COTERRA ENERGY, $31.47 (New York symbol CTRA; TSINetwork Rating: Average) (www.coterra.com; Shares o/s: 758.6 million; Market cap: $23.9 billion; Yield: 2.8%).
The roughly $21.5 billion all-stock deal will create one of the largest U.S. oil-and-gas producers and another dominant player in the Permian Basin of West Texas and New Mexico. Both companies currently operate in that oil rich region.
The roughly $21.5 billion all-stock deal will create one of the largest U.S. oil-and-gas producers and another dominant player in the Permian Basin of West Texas and New Mexico. Both companies currently operate in that oil rich region.
Oil prices have declined in recent months on fears about a possible global economic slowdown, which would lower demand. At the same time, increased production by OPEC countries and the removal of Venezuelan President Nicolás Maduro could significantly lift global supply. Despite the recent weakness, we continue to recommend that investors maintain some exposure to the oil sector as a hedge against inflation. To further cut your risk, stick with high-quality producers such as Imperial Oil.