While energy stocks have outperformed many other sectors of the economy in recent years, the Canadian banking sector has a longer track record for reliability. As of this writing, neither industry is outpacing the other. Persistent inflation and rising interest rates finally began showing signs of their negative impact in recent weeks.
The US banking sector saw several bank stocks collapse under pressure. Naturally, Canadian bank stocks also took a hit due to the panic the situation created. With higher borrowing and living costs, demand for energy sector products has also taken a hit. Accordingly, Canadian energy stocks took a major hit.
While downturns typically worry investors, these situations also offer savvier investors the opportunity to invest in high-quality stocks at deep discounts. Today, I will discuss a top Canadian bank stock and top energy stock. If you have to choose between the two sectors, looking at these two might offer you a good perspective to make a well-informed decision.
National Bank of Canada
National Bank of Canada (TSX:NA) might not be the largest Canadian bank stock. However, if you are looking for a bargain in the industry, it might be a nimble pick for a volatile market.
The smallest in Canada’s Big Six Banks, the National Bank of Canada fared better than its larger peers amid the volatility caused by the faltering US banks. Since the larger banks have more substantial exposure to the US banking market, NA stock felt less of an impact due to the volatility.
As of this writing, NA stock trades for $93.90 per share, down by 10.4% from its 52-week high. Considering that many bank stocks are still in a bear market due to the US banking volatility, this is an impressive figure. Despite declining by over 9% from its March 8 high, it is up by 2.4% year to date. At current levels, it also boasts a juicy 4.13% dividend yield.
Suncor Energy Inc. (TSX:SU) is arguably one of the top companies to consider among Canadian energy stocks. The recent slip in oil prices and mounting economic pressure has not brought good news for the $54 billion market capitalization integrated energy company. While it is no longer the biggest operator in the Albertan energy patch, it is a solid energy stock in its own right.
Between issues in the broader economy and its damaged reputation due to unsafe operating conditions, Suncor stock has not had it easy. The assignment of a new CEO might yield better results for Suncor in terms of its reputation management. The company also has plans to reinforce its renewable energy portfolio to future-proof itself. However, the stock is still out of favour.
As of this writing, Suncor stock trades for $40.62 per share, down by 24.2% from its 52-week high and by 1.8% year to date.
When it comes to choosing between the banking and energy sectors, it might be good to think about how long you plan to remain invested. If you want to buy and hold your investment for several decades, the energy sector might not be the best place to put your money to work.
The coming decade will likely see the world phase out the traditional energy industry for renewable energy. However, the banking sector might fare better as a longer-term investment.
Bank stocks are also quicker to bounce back from recessions. Though Canadian banks boast a longer track record than energy stocks. That said, solid energy stocks like Suncor could deliver greater returns in the short term as the economy recovers.