Wow, what a rough month February turned out to be! The S&P/TSX Composite Index fell by approximately 7%, investor sentiment has turned dramatically negative, and huge amounts of market value have just vanished.
Enbridge Inc. (TSX:ENB)(NYSE:ENB) certainly had its issues before the market sell-off, but with an additional fall in February, the stock is looking increasingly attractive.
Let’s take a look at what’s going on with Enbridge stock.
Enbridge stock price gets hit as coronavirus spreads
No analysis of stock price performance in February would be complete without addressing the elephant in the room: the spread of the coronavirus, which has caused stock markets to get pummeled.
But while investors were in fact triggered by coronavirus fears, these fears compounded on fears already present in an increasingly nervous investor population as one of the most spectacular bull markets in history continued its rise.
Fundamentally, Enbridge is still struggling with the negative sentiment around pipelines and the oil and gas industry in general, as well as the political environment that hasn’t been conducive to getting projects completed.
As such, Enbridge’s long-awaited Line 3 replacement is still waiting for certain permits and the timeline remains uncertain. But while the estimated in-service date is difficult to pin down, once the pipeline is up and running, it will have a significant positive impact on Enbridge’s cash flow.
Enbridge reports strong quarterly results — but Enbridge stock price crashes along with the TSX
In its latest quarter (Q4 2019), Enbridge generated more than $2 billion in distributable cash flow. Enbridge stock currently has a dividend yield of 6.77%, the company has a self-funded model, and its earnings and cash flow generated are highly visible and predictable.
With the world’s longest crude oil and liquids transportation system, delivering approximately 25% of North America’s crude oil and approximately 20% of North America’s natural gas, Enbridge remains a leading energy infrastructure giant that has provided shareholders with 22 years of dividend increases.
Foolish bottom line
Reviewing the performance of even our most defensive holdings, such as Enbridge stock, is an important exercise. Staying tuned into short-term stock price movements can alert us to changes in the investment thesis and to stock mispricings — of which we can take advantage.
In the case of Enbridge stock, any weakness is likely a buying opportunity, as this company is a defensive one that provides consumers and businesses with essential energy needs.
While not even a defensive stock like Enbridge has escaped February’s chaos, it’s exactly these types of quality stocks that recover best in the aftermath, so let’s shift our mindset to the opportunities being created today.
In closing, I would like to remind foolish investors of our belief in holding great businesses for the long-term. While this belief remains intact, we are also aware that sometimes, short-term stock price movements create opportunities to create wealth.
Blending this long-term focus with a keen eye for short-term stock mispricings, we can use both strategies in harmony, and our quest for financial freedom can be fulfilled.
