December is the month for tax-loss selling, and that means underperforming stocks could sink even lower in the weeks ahead. As investors look to sell off their poor-performing investments to reduce their taxable income next year, it could create some intriguing buying opportunities in the process. Here are two stocks that could struggle this month that you may want to consider buying on the dip, if you get the chance:
Shares of Suncor Energy Inc (TSX:SU)(NYSE:SU) have been cut in half this year as investors have dumped oil and gas stocks in the wake of falling oil prices and a gloomy outlook for the commodity as people are traveling less during the pandemic. For contrarian investors, there are plenty of reasons to buy and hold the stock as eventually, the world will get back to normal, and they could be making up for lost time when that happens — driving up the price of oil.
Sure, the days of US$100/barrel oil may be gone for good but as long as there’s stability in oil and gas and commodity prices aren’t falling into negative territory, that could be enough to at least get people buying shares of Suncor and other oil and gas stocks again.
Although it may be discouraging to see Suncor posting losses, what matters is cash flow and with $8.3 billion in current assets and the company generating positive free cash flow in its most recent quarter, it’s still in good shape today. A month ago, the stock was trading around $15 per share and it’s possible it may get close to its 52-week low of $14.02 before the year is over. If it falls to those levels you could set yourself up for some terrific returns over the long term.
At the start of 2020, the stock was trading around $45. It may take a while to get back there, but it’s definitely possible if you’re patient and willing to hang on for at least a year or two as the economy recovers from the pandemic.
And a drop in price could send its 3.8% yield up even higher, giving investors an added incentive to buy the stock.
If a top-yielding dividend is important to you, then Enbridge Inc (TSX:ENB)(NYSE:ENB) is another stock that should be on your radar this month. Like Suncor, the pipeline company has had a rough year in 2020 with its shares falling 22% thus far. But tax-loss selling could send the stock further down this month. It wouldn’t be surprising if shares of Enbridge were to fall to around $35 — not far from its 52-week low of $33.06.
To put into context just how good of a deal it would be to buy shares of Enbridge at that price, consider that if you ignore the erratic year that 2020’s been, you’d have to go back to 2011 — nearly a decade — for the last time the stock was regularly trading around that level.
Much has changed in the oil and gas industry since then, and while optimism isn’t nearly as high as it once was, this is still a solid company that’s generated positive free cash flow in each of the last four quarters. If it dips this month, you could score an investment that could bring you some great returns over the years, not only in terms of capital gains but also dividend income.
Today, Enbridge is currently paying investors a yield of 8% — a lower share price — so you could be making even more from owning shares of the stock.
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Fool contributor David Jagielski has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Enbridge.