The protest rallies against racism and still spreading coronavirus are not dampening the stock market rally. So far, the Toronto Stock Exchange (TSX) keeps chugging since its all-time low of 12,508.50 on March 12, 2020.
Canada’s main stock index has risen by 22% from that day and is down, year to date, by only 10.5%. Investor confidence is back and thoughts of another major market crash are distant. Many are anticipating a rocket ride from here on out.
Improving investment climate
COVID-19 remains a deadly threat to an otherwise rebounding market. The month-long rally could stall if the pandemic roars back. Meanwhile, there could be corrections in between, depending on how the market reacts to news updates.
Nevertheless, investors are in high spirits. The energy sector in particular is gaining strength on account of rising oil prices. Two companies providing vital services in the oil and gas industry are attracting attention.
Shawcor (TSX:SCL) shares rose 35.85% to close the week ending June 12, 2020, at $3.60. Analysts covering the stock see a sustained upward momentum and forecast the price to climb by another 10% to $4 soon.
The business has considerably slowed down due to the rapid decline in oil prices. It negatively impacted the revenues in the Pipeline & Pipe and Composites Systems segments. North American exploration and production operators implemented significant capital spending cuts while drilling and completion activities lessened.
Likewise, there were lower revenues in the Automotive & Industrial segment because of reduced operations and capacity. Supply-chain disruption was the cause of lower demand in other non-oil and gas markets.
Still, the business outlook is encouraging. Shawcor has an order backlog consisting of firm customer orders. The company expects to realize higher revenues on booked orders over the ensuing 12 months. Also, the oil and gas capex cycle should resume as energy demand recovers.
Stronger market position
CES Energy Solutions (TSX:CEU) is showing positive signs. The stock rose to $1.15 to finish the week higher by 8.49%. Market analysts are bullish and setting a high price target of $4, or a 247% increase in the next 12 months.
This $301.3 million company from Calgary provides consumable chemical solutions throughout the life-cycle of the oilfield. The solutions cover various stages: at the drill-bit, completion, and stimulation, at the wellhead and pump-jack, and through to the pipeline and midstream market.
The company is also reeling from COVID-19 and the recent collapse of oil prices. Investors, however, should look beyond these factors as energy demand increases, and the world enters the post-pandemic life.
Notably, CES even grew its market position in all four major parts of the business (drilling fluids and chemical production in Canada and the U.S.) in the first quarter of 2020. According to CES president and CEO Thomas J. Simons, the company has enough business to go. When the oil industry normalizes, expect CES to generate higher free cash flow.
Exciting options are mushrooming in the wake of the TSX rally. Investors can take advantage of Shawcor’s and CES Energy’s building momentum. Both energy stocks are due to skyrocket.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends ShawCor.