Don’t Buy Suncor (TSX:SU)! This Stock Is Clearly Superior

For decades, Suncor (TSX:SU)(NYSE:SU) stock was the king of Canada’s energy sector, but a new winner is emerging that could mint you a fortune.

| More on:

Suncor (TSX:SU)(NYSE:SU) remains one of the largest companies in Canada. That means it commands a large portion of the country’s investment capital. But judging future success by current size is a mistake.

If you’re invested in oil majors, you should rethink your investment immediately. The stock below is vastly superior.

This is not a drill

Oil is in big trouble. For decades, it ran the global geopolitical stage. Now, its power is on the decline. According to a recent BP report, global oil consumption may have already peaked. That means we’re set for a multi-decade decline in demand.

Suncor hasn’t been as bearish about the future, but competitor BP doesn’t have much incentive to emphasize the decline. After all, 90% of its business is tied to energy prices. The worrying part is that BP isn’t alone.

“In 2020, oil demand was nine million barrels per day below 2019 levels and is not expected to recover before 2023,” said another report. “Oil demand could peak sooner than previously expected if governments follow through with strong policies towards clean energy.”

What will replace oil giants like Suncor? Renewables giants specializing in wind, solar, and hydro.

“In the last eight years, the installed capacity of renewables has been outpacing systemically the installed capacity of fossil fuels-related plants,” said the director general of IRENA. “There is a structural change that is already there. The energy transition is already in place, it is unstoppable.”

Ditch Suncor for this stock

Oil isn’t going away completely, but it is being replaced by renewables. Global investment in renewables topped $1.5 trillion over the last five years. Investment is set to exceed $10 trillion over the next decade. One of the biggest winners will be Brookfield Renewable (TSX:BEP.UN)(NYSE:BEP).

Brookfield is a one-stop shop for everything renewable. It owns generation facilities across several continents, including hydro, solar, wind, and even battery storage. If you want automatic diversification that benefits from the shift to clean energy, this is the only stock you need.

In many ways, Brookfield is stealing directly from Suncor’s playbook. Suncor is considered an integrated oil company. That means it controls the entire supply chain, from exploration to refinement and transportation. These various businesses insulate the company from volatility in any one segment.

Brookfield is similarly diversified — not just geographically but by risk level. It frequently goes into distressed markets to buy assets on the cheap, even though there’s a bit of extra risk. But the company also owns assets on multi-decade purchase agreements, providing extreme cash flow visibility. It’s the perfect mix of risk and reward.

Bottom line

While the days of oil are numbered, renewables are just getting started. Suncor has a market cap of $42 billion while Brookfield is valued at just $14 billion. In the coming years, don’t be surprised if those price tags reversed themselves. Brookfield has strong tailwinds behind it, while Suncor is facing its toughest challenge yet.

The market knows Brookfield is a great buy, so the valuation multiples aren’t cheap, but don’t let that scare you away from making a long-term bet.

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 Ryan Vanzo has no position in any stocks mentioned.

More on Energy Stocks

Data center woman holding laptop
Energy Stocks

1 Magnificent Industrial Stock Down 35% to Buy and Hold Forever

This top TSX industrial stock is down 35% but poised for massive growth. Hammond Power's century-old business is transforming our…

Read more »

grow money, wealth build
Energy Stocks

This Energy Stock Yielding 6% Could Double Your Money by 2027

Here's why Enbridge (TSX:ENB) remains a company that could be among the most overlooked in the energy sector right now.

Read more »

Offshore wind turbine farm at sunset
Energy Stocks

The Smartest Renewable Energy Stock to Buy With $1,200 Right Now

Here's why Brookfield Renewable Partners (TSX:BEP.UN) remains a top pick for investors looking for a single stock in the green…

Read more »

oil and natural gas
Energy Stocks

1 Magnificent Canadian Energy Stock Down 23% to Buy and Hold for Decades

This oil and gas producer has increased its dividend annually for more than two decades.

Read more »

oil pump jack under night sky
Energy Stocks

Why Suncor Stock Climbed 4% After Earnings

Suncor stock reached record production, so why did shares fall afterwards?

Read more »

A solar cell panel generates power in a country mountain landscape.
Energy Stocks

How I’d Invest $20,000 in Canadian Renewable Energy Stocks to Become Financially Independent

Renewable energy stocks remain some of the best future investments, and these three already show strength.

Read more »

A worker overlooks an oil refinery plant.
Energy Stocks

The Smartest Oil Stock to Buy With $2,000 Right Now

An oil stock that reported strong Q1 2025 financial results is a screaming buy right now.

Read more »

a man relaxes with his feet on a pile of books
Energy Stocks

I’d Put $5,000 in This Dividend Giant for Decades of Income

Looking for a stock that can provide decades of income in addition to strong growth and defensive appeal? Consider this…

Read more »