The energy sector certainly took a big hit last year. However, this year has gotten off to a better start. Companies like Enbridge (TSX:ENB)(NYSE:ENB) and Suncor Energy (TSX:SU)(NYSE:SU) are ones I’d invite investors to have a look at right now.
Why, you may ask? After all, headwinds appear to be on the horizon.
Indeed, some investors believe Canada’s energy sector may be due for four years of headwinds during the Biden administration. His cancellation of the Keystone XL pipeline and acrimonious view on oil and gas isn’t bullish for Canada.
Additionally, some of these projects such as Enbridge’s Line 3 and 5 have run into trouble of late. Here’s my take on why I think investors shouldn’t put Enbridge in the penalty box right now.
Biden’s ban doesn’t really apply to Line 3
Pipeline stocks have been under pressure of late. Indeed, Biden’s cancellation of permits for the fourth phase of the Keystone XL pipeline sent shockwaves to all Canadian pipeline stocks.
Investors are concerned that Enbridge could face the same fate. However, the company’s Line 3 Replacement Project should be online this year. It’s been approved, and is very close to nearing completion. Accordingly, most analyst expect this expansion project to narrowly escape Biden’s grasp.
Line 5 is a different story
Enbridge’s Line 5 is the most recent Biden target which has the potential to stir the relationship between the U.S. and Canada. Here is how this situation stands right now: Michigan opposes the Enbridge Line 5 expansion, while Canada and some states think it is too crucial to be stopped.
As it stands, U.S. courts are expected to take a long time to resolve this dispute. Accordingly, these risks surrounding the company’s Line 5 expansion may weigh on this stock for some time. Therefore, investors in Enbridge need to be patient with this stock. In my view, this is a long-term stock to consider, so holding for at least a few years is prudent in this case.
As fuel consumption increases following lockdowns being lifted, oil pipelines should return to capacity near the second half of the year. Meanwhile, Enbridge’s natural gas transmission, storage, and distribution assets will continue to act as a steady source of income. Buying the dips on this stock is an excellent strategy, as Enbridge has been a solid historical outperformer and is likely to continue this sort of performance long term.
Again, this stock is a long-term holding. Accordingly, I’d invite investors to be patient and buy along the way. Enbridge is a winner.
Like Enbridge and Suncor? You definitely need to read this:
Before you consider Suncor Energy, you may want to hear this.
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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 Chris MacDonald has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Enbridge.