Canadian Natural Resources Ltd. (TSX: CNQ)(NYSE: CNQ), Cameco Corporation (TSX: CCO)(NYSE: CCJ), and Teck Resources Ltd. (TSX: TCK.B)(NYSE: TCK) are getting killed right now, and conventional investing wisdom suggests that trying to catch a falling knife is a risky way to buy a stock.
However, if you have a bit of cash sitting on the sidelines, and you tend to be a long-term contrarian investor, I think these companies are worth considering for a small position in the portfolio.
Canadian Natural Resources
Canadian Natural Resources probably owns the best portfolio of energy assets in the entire oil patch. The company’s Horizon oil sands operation is extremely efficient, and the CEO recently said Canadian Natural will be able to pump out strong free cash flow for decades, even if oil finally stabilizes around $70 per barrel.
The company is also one of the largest natural gas producers in western Canada. This winter is expected to be very cold and that should provide support for natural gas prices.
In northeastern B.C. and northwestern Alberta, Canadian Natural invested early in the emerging natural gas liquids play. The company has amassed an impressive land portfolio and already has the required infrastructure in place to give it a huge long-term competitive advantage in the region.
Once the dust settles on the current oil rout, Canadian Natural will be one of the energy producers left standing. In the end, investors will benefit from the company’s ability to buy weaker competitors for fire-sale prices.
Cameco owns the world’s largest uranium mine. The facility also holds the highest-grade deposits on the planet. This combination positions Cameco well for the coming reboud in uranium demand.
Japan will eventually restart its nuclear plants. Two will probably come on line in 2015 and analysts expect as many as 30 to be in operation again by 2019. At the same time, roughly 90 net new global reactors are scheduled to begin producing electricity in the next 10 years.
Combine this with a decrease in global uranium production and you get the perfect set up for supply squeeze sometime in the next five to seven years.
Teck is Canada’s largest diversified miner. The company produces metallurgical (steelmaking) coal, copper, and zinc. The global copper market is in the dumps, and worldwide metallurgical coal production is still outpacing demand.
The met coal oversupply is expected to reverse in the second half of 2015 as production cuts by global suppliers bring the market back into equilibrium. Copper prices are expected to remain near $3.00 per pound for 2015.
Teck is a low-cost producer in all of its business units and continues to be profitable despite the abysmal conditions in the met coal and copper markets.
The company pays a dividend of $0.90 per share that yields 6.6%. Teck will reduce or eliminate its share-buyback plan before it cuts the dividend, so I expect the distribution to remain in place as long as commodity prices stabilize near current levels.
CNQ, Cameco, and Teck definitely come with risks and it is a good idea to balance out the contrarian picks with a few solid dividend-growth stocks. The following free report discusses three companies that are worth adding to your watch list for 2015.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Andrew Walker owns shares of Teck Resources.