Do you want to invest in oil stocks in August 2023?
You may be making a wise decision.
Oil prices are currently relatively high. They’re not as high as they were in 2022, but they are higher than they have been for most of the last eight years. In 2015, oil prices slid to shocking lows and, for the most part, stayed there until 2022. That year, oil prices shot all the way up to $120 due to the conflict in Ukraine. Prices have levelled off since then, but at $81.50, they are still fairly high by the standards of recent history.
Some people think that oil prices will head right back to mid-2022 levels eventually. I’m personally skeptical of that claim, but I think that oil industry fundamentals support relatively high prices for the foreseeable future. With that in mind, here are some oil stocks to watch in August 2023.
Suncor Energy (TSX:SU) is a Canadian oil company that sells crude oil and operates gas stations. It is best known for Petro-Canada, its chain of gas stations that it operates all across the country. Suncor has faced some criticism for its gas station chain, particularly from an activist investor who wanted the company to spin that business unit off. Suncor refused to do so and is still making money off its gas stations to this day.
How is Suncor doing lately?
Well, its most recent quarter wasn’t so hot. In it, revenue declined 10.7%, net income declined 30.4%, and diluted earnings per share (EPS) declined 25%. Not exactly a great showing, but then again, oil prices were much lower in the first quarter (Q1) than they are now. The company’s earnings for Q2 should improve somewhat and then improve dramatically in Q3.
Enbridge (TSX:ENB) is a Canadian pipeline company that transports crude oil and provides natural gas as a utility. It transports crude all across North America and supplies 75% of Ontario’s natural gas. This is a pretty important business, to put it mildly, so it should come as no surprise that the company is successful.
It has a 42% gross profit margin (“gross profit” is revenue minus direct selling costs), and it has grown its normalized earnings at 22.5% per year over the last 10 years. These are pretty good numbers, and if Enbridge can continue putting out such numbers in the future, it should deliver adequate returns for investors.
Berkshire Hathaway (NYSE:BRK.B) is a U.S. holding company primarily involved in insurance. You might wonder why I’m mentioning an insurance company in an article about energy. It has to do with how Berkshire finances its insurance operations.
Berkshire invests large percentages of its insurance premiums (“float”) into stocks, including energy stocks. It owns large stakes in some of the world’s biggest energy companies. For example, it has a 25% stake in Occidental Petroleum. It also owns a 92% interest in Berkshire Hathaway Energy. These companies give Berkshire considerable exposure to energy, without it being a pure-play oil company whose entire future depends on oil prices staying high.
Overall, it’s a good stock to consider if you suspect that oil prices will stay high but aren’t quite 100% sure about it.