Thursday was a bad day for energy stocks on the TSX. While losses were far from catastrophic, they were widespread enough to generate headlines. The TSX suffered as a result – as it usually does when energy stocks are down.
But this is no ordinary year, and the reminder that energy stocks are vulnerable rattled pundits. Natural gas prices are the lowest they’ve been since 1995. In short, it’s a bad time to be in the energy business.
The worst-performing TSX energy stocks
Bonavista had a terrible week, losing 71% of its market value in just five days of trading. The plunge in share price comes after a proposal that would wipe out half of its debt but leave just 7% of the company in the hands of its shareholders.
The penny stock immediately lost half of its value overnight. The outlook for natural gas has been weak all year, but this name is especially toxic at the moment.
Other names in natural fuel industry have also seen a calamitous year, though not quite like Bonavista. For instance, Canadian Natural Resources has seen its share price plunge by 35% year-on-year. This average is all the more remarkable given the fact that a three-month rally of 65% has been factored in.
Similarly, Tourmaline is down 27% since last June despite a 47% rally during the most recent quarter.
Other big losers in the energy space include Suncor Energy, down 46% and mid-streamer Enbridge, which is down almost 20%. Even a slight oil price recovery this week has done little to improve their share prices. This was an exemplary pair of stocks last year.
However, this week has seen Suncor and Enbridge down 3.8% and 3% respectively when they should have been rallying. The takeaway? This is no longer about oil prices.
An outperforming energy stock
Few names have really stood out this week. Northland Power (TSX:NPI) was a notable exception, up 2.8% Thursday with BMO hiking its target price. Green energy remains one of the most sustainable sources of upside in the energy space.
In fact, the green power revolution is one of the strongest international growth trends for investors to tap into. Northland is a good place to start, up 31.5% in the last 12 months.
A 3.5% dividend yield makes Northland an exciting prospect for income portfolio owners. Its wind and solar projects are of particular interest, with a slew of international partnerships under its purview. Investors gain instant access to the green economy with this name that decimates the market. This stock is still reasonably good value, with shares selling at a 16% discount against their fair value.
A high target price of $36 might not leave much room for upside off its current $33 price tag. However, with a 60% payout ratio, Northland’s dividend is both adequately covered and ripe for growth potential. Investors might expect some steep returns in the mid- to long-term from this name.
Additionally, the global renewable sector is looking at a conservative compound average annual growth (CAGR) of 9.5% by mid-decade, making this a high-growth play.