It’s a bad idea to buy stocks and intend to sell them for quick profits. However, when your stocks move up meaningfully and quickly, it’s a good idea to review them to see if the market is giving you the chance to sell opportunistically. The type of stocks in question also makes a difference. For example, if the stocks in question tend to report unpredictable earnings or cash flow, investors should consider taking profit when things look good for the stock.
Here are three TSX stocks, including Enerplus (TSX:ERF)(NYSE:ERF), and Surge Energy (TSX:SGY), and Fission Uranium (TSX:FCU), which climbed 12% to 31% in the last five trading days. The rally has more or less to do with the escalation in the Russia-Ukraine conflict that’s driving commodity prices higher.
ERF, FCU, and SGY data by YCharts
The 10-year price chart reveals more useful information. Specifically, these TSX stocks are highly cyclical. Investors who are trying to make big money should aim to buy at lows and hold through recoveries. Right now, the chart indicates the stocks are already well on their way in their recovery. Additionally, Surge Energy has had weak long-term performance, which requires further investigation for interested investors.
ERF, FCU, and SGY data by YCharts
Enerplus stock
Here are some recent industry expert insights on Enerplus stock from Eric Nuttall in late January:
“We believe there’s a large amount of company upside left. At US$80 oil, the company could privatize in four years. At $100 oil, the company could privatize in about two years. The company share price should be $32 per share at US$80 oil and $42 per share at US$100 oil.”
Eric Nuttall, partner and senior portfolio manager, Ninepoint Partners
At writing, the WTI oil price has shot past the US$100 mark and is hovering around US$106 per barrel, while Enerplus stock trades at $16.75 per share. According to Nuttall, ERF stock can at least double from current levels. However, the 12-month consensus price target across 13 analysts is $17.50 per share, which implies the energy stock is almost fully priced in the near term.
Surge Energy stock
One problem with Surge Energy is that it has persistently increased its outstanding shares at a higher rate than its peers and thereby diluting existing shareholders more. Below is a comparison between Surge Energy and Enerplus of the increase in their outstanding shares over the same period.
However, Surge Energy’s greater dilution of shareholders did not stop the market from turning bullish on Surge Energy quickly as oil prices swiftly made their climb. In fact, Surge Energy is now an 18-bagger from the July 2021 levels of $0.46 per share! According to Yahoo Finance, over the next 12 months, seven analysts have a price target of $10.25 per share, which represents near-term price gains potential of 22%.
ERF and SGY Average Diluted Shares Outstanding (Annual) data by YCharts
Fission Uranium stock
Fission Uranium is in a different industry than Enerplus and Surge Energy. However, the stock’s volatility is still driven by the underlying commodity prices, most notably, uranium. The spot price of uranium has increased by approximately 70% since May 2021.
The stock trades at below $1 at writing. Analysts think additional price appreciation of more than 60% is possible over the next 12 months. Notably, Fission Uranium hasn’t generated any revenues yet. However, it believes it could potentially be developing one of the world’s lowest-cost uranium mines.
The takeaway is that if you’re sitting on nice gains for commodity stocks, you should consider at least taking partial profits, because commodity prices can turn quickly when macro factors change. Active investing is required in these stocks.
