Is it Time Investors Started Thinking About Parting Ways With These 2 Canadian Large-Cap Stocks?

Shares in Suncor Energy Inc. (TSX:SU)(NYSE:SU) and Enbridge Inc (TSX:ENB)(NYSE:ENB) are up nearly 20% so far in 2019. But is it time investors thought about locking in those gains?

| More on:

Shares in two of Canada’s largest energy companies are off to a spectacular start to the new year; there’s no question about it.

But on the heels of nearly 20% gains through less than the first two months of 2019, is it time you thought about parting ways with stock in Suncor Energy (TSX: SU)(NYSE: SU) and Enbridge (TSX: ENB)(NYSE: ENB)?

Both companies play large and even dominant roles in Canada’s energy markets and both boast strong to even stellar balance sheets to boot, so there’s no reason to believe that the end is near for either of these two energy giants long term.

But that’s just it. These are what you would call “mega-cap” stocks. Suncor currently trades at a market capitalization of just over $70 billion, while Enbridge is even larger, just a shade shy of the $100 billion mark.

And while there’s certainly truth to the adage of there being “safety in numbers,” there’s likewise truth to the adage of the “law of large numbers,” which says that as companies get increasingly bigger, it becomes that much more difficult for those companies to sustain the pace of growth they have previously enjoyed.

SU stock gained 18.65% through the first six weeks or so of trading in 2019, and ENB stock gained 19.96% over the same stretch. Even though I still happen to like both of these companies’ prospects over a long time horizon, I have to scratch my head and wonder if investors holding stock in both companies would want to consider taking a bit of risk off the table, locking in those gains.

Not hurting that argument, mind you, is that ENB stock is now up against its 52-week high. That would suggest (to me, at least) that it may take a bigger push to get ENB shares above those levels.

And Suncor, while it’s still $10 or so below its 52-week-high watermark, is also not far off the company’s all-time high.

When you factor in that the price of crude oil today trades well below its all-time highs, it seems to me that it suggests both of these two stocks are not exactly trading on the most firm of footing.

Sure, those investing with a longer time horizon in mind and who are wary of “over-trading” their accounts may be better off staying the course and sitting tight.

Both stocks pay shareholders solid dividends with SU stock currently yielding 3.71% annually, and ENB stock yielding 6.11% per year.

But thanks to the sell-off markets experienced in the fourth quarter of last year, I think there are even better opportunities out there for investors right now on a risk-reward basis.

Fool contributor Jason Phillips has no position in any of the stocks mentioned. Enbridge is a recommendation of Stock Advisor Canada.

More on Dividend Stocks

pregnant mother juggles work and childcare
Dividend Stocks

Furniture Just Got a Lot More Expensive in Canada: Is Leon’s Stock a Winner or a Loser?

Leon's Furniture's roughly 3.9% dividend yield and discount to the analyst consensus price target could make it an attractive recovery…

Read more »

alcohol
Dividend Stocks

This Stock Could Be a Retirement Game-Changer

This Canadian retirement stock combines strong recent gains, growing financial businesses, and reliable quarterly dividends.

Read more »

man touches brain to show a good idea
Dividend Stocks

Exporters (Including Canadian National Railway) Face New Tariff Risk This Week: What Investors Need to Know

Canadian National Railway faces fresh tariff-related uncertainty as Canada-U.S. trade tensions escalate, but its strong earnings, cash flow, and growth…

Read more »

u.s. government spending
Dividend Stocks

U.S.-Canada Trade Talks Have Collapsed: Should You Sell Your Exporter Stocks?

U.S.-Canada trade tensions are heating up, but investors may want to look beyond the tariff noise before dumping these two…

Read more »

crisis concept, falling stairs
Dividend Stocks

Down 13% From its All-Time High: Is This High-Yield Dividend Stock a Buy Right Now?

This top energy infrastructure player has attractive growth potential, but faces some near-term headwinds.

Read more »

Train cars pass over trestle bridge in the mountains
Dividend Stocks

1 Number Could Tell Investors Whether This Sell-off Is Nearly Over

A small pullback in Canadian National Railway looks more interesting when freight demand is still rising.

Read more »

container trucks and cargo planes are part of global logistics system
Dividend Stocks

I’d Put My Entire $7,000 TFSA Contribution Into This Growth Stock

A single $7,000 TFSA contribution can turn into a much bigger number if it’s invested in a durable grower like…

Read more »

man touches brain to show a good idea
Dividend Stocks

The Smartest Stocks to Buy With $1,000

These three smartest stocks to buy offer durable businesses, long-term growth potential, and a compelling way to invest $1,000 today.

Read more »