MENU

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

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.

Our #1 Stock to Buy in 2019 (and Beyond!)

When you buy heavily cyclical stocks at low prices… and then hold the shares until the cycle reaches its peak… you can make a very healthy profit.

Every investor knows that. But many struggle to identify the best opportunities.

Except The Motley Fool may have a plan to solve that problem! Our in-house analyst team has poured thousands of hours into their proprietary research – and this is the result.

Our top advisor Iain Butler has just identified his #1 stock to buy in 2019 (and beyond).

Click here to claim Iain’s new report, absolutely FREE!

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

I consent to receiving information from The Motley Fool via email, direct mail, and occasional special offer phone calls. I understand I can unsubscribe from these updates at any time. Please read the Privacy Statement and Terms of Service for more information.