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2 Cheap Oil and Gas Stocks to Buy Right Now

The longer the price of oil stays around $70, the more stable it is and the better off the industry is in the short term. A big reason why the rising price of oil hasn’t encouraged capital spending or investing in the industry is that many don’t believe that current prices are sustainable. However, the longer we stay at this price point, the more convincing it becomes that there is support there, especially if there is a potential for supply cuts in the industry to become much longer-term.

The bearish conditions in the industry have created some excellent buying opportunities for investors and could help you earn significant returns by taking on a little risk. The two companies listed below could earn you significant returns over the long term, as the industry is on the verge of breaking out.

Enbridge Inc. (TSX:ENB)(NYSE:ENB) is front and centre when it comes to undervalued oil and gas stocks. As oil prices have risen, its stock price has continue to decline. Cancelled pipelines and a political environment that has not been conducive for growth are some significant issues that have weighed on the minds of investors as Enbridge reached a new 52-week low recently.

Year-to-date, the share price is down more than 20% and in the past 12 months it has declined around 30%. The decline in price has created two positives for investors: a higher yield and a better valuation.

Dividend yield is inversely proportional to share price since you’re getting the same payout, but now have to buy less in order to get it. And as long as you’re not concerned about the company’s ability to pay the dividend, then it’s a great opportunity to secure a higher yield. Currently, Enbridge pays its investors 6.8% in dividends per year, and the company also has a strong track record of increasing its payouts over the years.

At a little more than book value and 24 times its earnings, Enbridge stock is trading at attractive multiples. With the share price near its 52-week low, there’s a lot of upside for investors today.

Cenovus Energy Inc. (TSX:CVE)(NYSE:CVE), unlike Enbridge, has caused many of its own problems. Last year, a questionable acquisition saw the stock hit a new all-time low as investors were concerned that the company was taking on too much debt and that it had become too risky of an investment to own.

Fast forward to today, and although the company had a disappointing earnings last quarter, it looks like the gamble might pay off with commodity prices rising and Cenovus being in a good position to capitalize on stronger conditions in the industry.

Although Cenovus has declined 30% in the past two years, it has started to find some stability as year-to-date the share price is actually up around 8%. That said, the stock is still trading well under book value and at a multiple of just six times its earnings. It, too, could get a big boost from a better outlook for the industry, and buying now could give you the potential to earn significant gains when conditions turn more bullish.

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Fool contributor David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns shares of Enbridge. Enbridge is a recommendation of Stock Advisor Canada.

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