There are a lot of warnings going around right now that investors have missed the boat. The time to buy has come and gone, and the deals and steals that were once in abundance are now reaching 52-week highs. I can’t deny this completely. There were stocks out there such as Canopy that went down by half, only to return to highs they haven’t seen since summer. But does that necessarily mean they aren’t a buy? Today, I’m not looking at cannabis stocks, but something that’s still both cheap and a solid investment over the long term: energy stocks. There are a number…
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There are a lot of warnings going around right now that investors have missed the boat. The time to buy has come and gone, and the deals and steals that were once in abundance are now reaching 52-week highs.
I can’t deny this completely. There were stocks out there such as Canopy that went down by half, only to return to highs they haven’t seen since summer. But does that necessarily mean they aren’t a buy?
Today, I’m not looking at cannabis stocks, but something that’s still both cheap and a solid investment over the long term: energy stocks. There are a number of energy stocks out there that, while also seeing some highs, are still a bargain.
Today, Pembina Pipeline (TSX:PPL)(NYSE:PBA) hit its 52-week high at $49.54 per share. The company has been on a steady increase since the markets began to rebound on Christmas Eve. While this alone doesn’t make the company unique, what makes it interesting is its future outlook.
It’s all about the long game with this stock. While there are still production cuts, this stock remains at a low price considering its future share estimates. That’s because Pembina has a number of long-term contracts that mitigate the risks that come with production cuts, and it has a number of projects in the works that by 2020 will bring $3.1 billion in growth to the company.
Recently, the company also boasted that it will be expanding phase six, seven, and eight expansions after the success of the Peace pipeline expansion project. It also acquired Veresen, which promises even more expansion projects in the future.
What investors can expect in the short term is a dividend that should increase by 5% over the next five years, which currently sits at 4.66%. That could be a nice chunk of change by the end of 2019, where analysts are expecting the stock to be between $52 and $60 per share.
While Pembina can seem like a no brainer, Cenovus (TSX:CVE)(NYSE:CVE) has proven to take more convincing for investors. The company is still about $3 short of its 52-week high at $11.27 at the time of writing this article. But that doesn’t mean there isn’t a chance for the stock to have a huge rebound.
Granted, the company has some tough news this week when Enbridge announced a delay to its Line 3 crude oil pipeline expansion. The news sent Cenovus shares down about 7.5%, as the company is one of the most exposed to Canadian oil prices.
But what investors need to remember is this is all temporary, and Cenovus investors — just like Pembina — has a reason to be hopeful for the future. While the company is struggling with current oil prices, it has a strong balance sheet that will see them through this down time while they continue working on their growth projects.
Those growth projects include its solvent-aided process that could put it in the lead of oil sand producers, and its recent acquisition of the FCCL Partnership put it in a prime position to use this technology once it’s ready for large-scale use.
The best news is that this stock is still crazy undervalued. Analysts predict the stock should reach $19 a share, and that’s a far cry from its current share price in the $11 range.
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Fool contributor Amy Legate-Wolfe owns shares of PEMBINA PIPELINE CORPORATION. Pembina is a recommendation of Dividend Investor Canada. Enbridge is a recommendation of Stock Advisor Canada.