1 Top Canadian Energy Stock to Buy in May 2021

Suncor Energy (TSX:SU)(NYSE:SU) stock is a top Canadian energy stock that doesn’t get the respect it deserves after oil’s rally.

| More on:
Oil pumps against sunset

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Last year, Canadian energy stocks were viewed as uninvestable. It seems like such a long time ago when oil prices made an unprecedented move into negative territory. It was a new low for the Albertan oil patch, as fossil fuel stocks continued nosediving into the abyss.

The rise of green energy stocks didn’t help the cause. Some folks thought that the days of the energy patch were numbered, as renewable energy continued picking up traction on the back of green-friendly policies proposed by U.S. president Joe Biden. Even with incentives and all the sort, it’s going to take decades before the world transitions from fossil fuels.

While there’s no denying that today’s oil players are on the wrong side of a secular trend, it’s also foolish (that’s a lower-case f) to deny the real value to be had in fossil fuel stocks, as the new generation of investors shunned them in spite of their attractive valuations, their real cash flows, and their longer-term growth prospects.

There’s still plenty of gas left in the tank of the top Canadian energy stocks

Simply put, Canadian energy stocks have plenty of fuel left in the tank. And it’s those who are willing to go against the grain that are most likely to reap big rewards, as the world economy bounces back from its sharpest and shortest recession in decades.

Without further ado, let’s have a closer look at one top Canadian energy stock that I think ought to be scooped up now before West Texas Intermediate (WTI) has a chance to make a run to US$100 — a level thought unreachable just a year ago. Moreover, with West Canadian Select (WCS) prices likely to close the gap with WTI, I’d argue that there’s even deeper value to be had in Canada’s oil patch, which is ailing no longer.

Suncor Energy: Down but not out

Warren Buffett has dabbled in shares of Suncor Energy (TSX:SU)(NYSE:SU) for a reason. It’s one of the best integrated oil players on the planet, and it’s arguably the best Canadian energy stock, despite losing the title of Canadian oil sands king to its top peer Canadian Natural Resources. Suncor’s dividend took a hit, but I think it will be hiked at a massive double-digit rate on the other side of this pandemic.

With shares north of 37% below their 2020 highs, I find it absolutely ridiculous that the firm is still depressed following oil’s latest rally. Suncor may have lost fans last year, but I think they’ll return, as there’s no denying the value to be had in the resilient energy darling that’s gushing with cash.

If oil makes a run to US$100 (it seems far-fetched, I know), Suncor stock could easily make blast off past its 2020 high in a hurry. At 1.1 times book value, I find the name to be unsustainably undervalued, given industry headwinds are fading in favour of tailwinds.

Foolish takeaway

Suncor is the epitome of a deep-value stock. At nearly book value and 13.3 times next year’s expected earnings, the top Canadian energy stock has a good margin of safety and a low bar set in front of what could be one last oil boom. Whether you’re looking for a growing dividend, deep value, or capital gains, don’t sleep on Suncor stock. It’s down, but it’s not out.

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 Joey Frenette has no position in any of the stocks mentioned.

More on Energy Stocks

oil and natural gas
Energy Stocks

Better Buy: Suncor or Cenovus?

Suncor Energy Inc. (TSX:SU)(NYSE:SU) and Cenovus Energy Inc. (TSX:CVE)(NYSE:CVE) have soared in the year-over-year period.

Read more »

A stock price graph showing declines
Energy Stocks

2 Cheap Canadian Stocks That Likely Won’t Be on Sale For Much Longer

These two Canadian stocks are close to returning to all-time highs. Don’t miss your chance to take advantage of these…

Read more »

canadian energy oil
Energy Stocks

3 Rising Energy Stocks to Buy as Oil Hits 6-Month Low

Three rising energy stocks are strong buys today as their upward momentum is likely to continue due to the tight…

Read more »

Retirement plan
Dividend Stocks

4 Stocks That Could Turn $100,000 Into $500,000 by the Time You Retire

Companies such as Brookfield Asset Management have the potential to consistently beat the broader markets and deliver stellar returns to…

Read more »

energy industry
Energy Stocks

Vermilion Energy (TSX:VET) Stock Set to Soar Higher After a Solid Q2 Show

Should you buy VET stock?

Read more »

Gas pipelines
Energy Stocks

Unpopular Opinion: Oil Stocks Are Still Good

Oil prices are coming down, but oil stocks like Suncor Energy (TSX:SU)(NYSE:SU) are still good.

Read more »

Super sized rock trucks take a load of platinum rich rock into the crusher.
Energy Stocks

3 Top Commodity Stocks for Passive Dividend Income

Commodity stocks like Cameco Corp (TSX:CCO)(NYSE:CCJ) offer dividend income.

Read more »

Group of industrial workers in a refinery - oil processing equipment and machinery
Energy Stocks

2 Oil Stocks Under $11 With 90-110% Gains So Far This Year

Two small-cap oil stocks with enormous gains year to date are likely to deliver far superior returns in 2022 versus…

Read more »