February could be a big month for a number of TSX-listed stocks.
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Air Canada
As I touched on in a recent piece, I think February could be a make it or break it month for Air Canada’s (TSX: AC) stock. The company releases its year-end financials and outlook on February 12. This will be a very important moment for investors, particularly with respect to the company’s forward-looking outlook. I think most investors are looking well past this pandemic and are looking to pick up high-quality companies like Air Canada at a discount. Accordingly, I expect the days around February 12 to be high volume ones for this stock.
I think there’s significant room for optimism with this stock right now. In other words, I think the upside for this stock is probably greater than its downside right now. I am expecting we’ll see more bullish numbers and a more bullish outlook than what the market expects right now. Air Canada has done a good job of stemming the bleeding from the pandemic. Additionally, the company is poised to rebound once we see pandemic-related travel restrictions loosened or lifted later this year or next year.
This is indeed a risky turnaround bet, so downside risks exist with this stock. As such, I’d caution investors to invest Foolishly – in a diversified, non-speculative manner. If this is a company one wants to own long-term, and one believes the company’s full-year results will be a positive surprise, buying now makes sense. For others not willing to take on this level of risk, staying on the sidelines may make more sense.
Enbridge
A company I would put in my “forever” holdings bucket is Enbridge Inc. (TSX: ENB)(NYSE: ENB).
This is a company that is often looked to as an income investment. Indeed, Enbridge’s 7.7% yield is a hefty one right now. For investors who believe, as I do, that this is a well covered and sustainable dividend, locking in such a yield right now could be a great move. Bond rates are still near zero and expected to be there for some time. Adding some higher-yield exposure does inherently increase portfolio risk. However, I think this is one of the “least risky” near-8% yields one can get their hands on these days.
Enbridge’s cash flows have historically been extremely stable, and have grown over time. I think the energy sector could get a bid in the coming months if we see higher commodity prices flow through and a bull market take hold. I’ve touched on this in the past, and I think this is broadly bullish for the sector. Despite relatively low levels of exposure to commodity prices, Enbridge is indirectly impacted by these factors.
Furthermore, Enbridge is the cream of the crop when it comes to pipeline companies in Canada right now. This company has size, scale, and a pipeline of existing expansion projects providing a strong growth thesis moving forward. I think low bond yields are bullish for this company, both from a dividend standpoint and from a debt refinancing standpoint. Enbridge is a heavily leveraged company, so I think the stars are aligning to own companies like these right now.
