2 Undervalued Stocks in an Overvalued Market

Enerplus Corporation (TSX:ERF)(NYSE:ERF) and OceanaGold Corporation (TSX:OCG) face a bright future, with rising commodity prices and solid operational performance.

| More on:
You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Today’s market is facing many roadblocks.

Trade wars, geopolitical risk, rising interest rates, and the fact that the market is trading near all-time highs with stretched valuations has put the market at risk.

So, it is a breath of fresh air when we come upon stocks that are attractively valued, with good upside potential and low downside risk.

OceanaGold Corporation (TSX:OCG)

$2.2 billion OceanaGold has sure had a busy year. With the ramping up of production from its Haille mine, production and cash flow growth have been on a tear.

In 2017, the company reported a 38% increase in gold production and an 8.6% reduction in all-in sustaining costs. With a healthy balance sheet, minimal debt, and a cash balance of $73 million, the company is well positioned to benefit from rising gold prices.

And, as luck would have it, as the U.S. dollar continues to weaken, the price of gold continues to strengthen. So, gold continues to make a comeback.

Recall that in late 2011, gold prices peaked at close to $1,900 per ounce, then retreated steadily to levels of just over $1,000 per ounce at the end of 2015. Here we stand with gold trading at just over $1,300 per ounce, as the U.S. dollar falls, and we witness the playing out of the well-known inverse relationship between the two.

There are certainly many questions that remain with respect to where gold is going from here, but one thing is sure: the industry has suffered through a period of record production and declining demand, and in response it has worked hard to reduce costs and improve balance sheets, and this leaves the industry well positioned to reap the rewards of rising gold prices.

Enerplus Corporation (TSX:ERF)(NYSE:ERF)

Enerplus has been a beacon of strength in the oil and gas sector. A top-notch balance sheet, operating performance, and cash flow growth profile set it apart from its peers. Add to this the fact that it is trading at very attractive multiples, and we have a very interesting buy case for the stock.

With slightly less than half of its production coming from conventional crude oil, this $3.4 billion oil and gas giant is benefiting from the sharp rise in crude and natural gas prices.

In the latest quarter, the fourth quarter of 2017, the company reported a 55% increase in cash flows, driven by increasing crude oil and natural gas prices, and a 6% reduction in operating costs.

Going forward, the company will focus on the high-growth Marcellus and North Dakota areas to spur year-over-year production growth of 10% and liquids growth of 20%.

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 Karen Thomas has no position in any of the stocks mentioned.

More on Energy Stocks

energy oil gas
Dividend Stocks

2 High-Yield Energy Stocks to Buy as Recession Approaches

Energy stocks such as TC Energy and Canadian Natural Resources allow investors to generate income even in recessionary times.

Read more »

Dividend Stocks

Passive Income Generator: 1 Dividend Stock Yielding 6.16%

A high-yield energy stock that pays monthly dividends is a reliable passive income generator for investors.

Read more »

oil and natural gas
Energy Stocks

Why Suncor Energy (TSX:SU) Fell 8% Last Week

Suncor Energy stock fell 8% last week. Is it still a good buy?

Read more »

Oil pumps against sunset
Energy Stocks

1 Canadian Oil Stock (With Hot Monthly Dividends) to Buy Now and Hold Forever

This top Canadian oil and gas stock could be a great source of reliable monthly passive income.

Read more »

Payday ringed on a calendar
Energy Stocks

3 Incredibly Cheap Canadian Stocks to Buy for Monthly Dividends

Companies such as Savaria and Pembina Pipeline pay monthly dividends, making the stocks attractive to income-seeking investors.

Read more »

canadian energy oil
Energy Stocks

Why Oil Prices Crashed 9.5% Last Week

Oil stocks like Suncor Energy (TSX:SU)(NYSE:SU) crashed 6% last week. Are they good buys on the dip?

Read more »

Going against the grain
Energy Stocks

RRSP Investors: 1 Top Contrarian Stock to Buy Now

Here's why this top Canadian energy stock with a high dividend yield looks undervalued and good to buy now for…

Read more »

Business man on stock market financial trade indicator background.
Energy Stocks

Market Volatility: 2 Value Stocks to Buy Right Now

The market volatility does not look like it will let up any time soon, but these two stocks are too…

Read more »