Canadian Natural Resources Stock Is a Tremendous Bargain Today

Canadian Natural Resources (TSX:CNQ) is an oil kingpin that investors should nibble at if they seek value and a potential breakout.

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Commodity plays really had a chance to flex their muscles last year, as the tech-focused selloff of 2022 took hold. Indeed, oil and gas plays weren’t the most exciting investments for investors seeking sizeable gains over a short period.

Once the tables turned and resource stocks outpaced technology names, contrarians were finally compensated for their patience. Fast forward to today, and the tables have turned once again, with tech plays leading the way while oil and other commodity stocks cool off.

Nobody knows if the tables will turn yet again in the second half of 2023. Regardless, I think investors should look to Canada’s top commodity plays as essential portfolio diversifiers.

Time to rotate back into the energy stocks?

At this juncture, I view Canadian Natural Resources (TSX:CNQ) stock as a pretty intriguing value option for investors who seek to rotate back into value-conscious names as they seek to take a tiny bit of profit off their biggest year-to-date winners, likely names in the tech space.

Sure, it sounds like a bad idea to trim away at your portfolio’s biggest winners. That said, I believe that taking some money off the table whenever a stock surpasses your estimate of fair value is only prudent. In any case, there are plenty of higher-yielding value plays on the TSX Index that I think could set investors on a path for above-average results as we head into what could be a more volatile autumn season.

Canadian Natural Resources

Canadian Natural Resources stock has really begun to pick up traction over the past month, surging nearly 8%. Undoubtedly, the price of oil has steadily moved higher in recent weeks (West Texas Intermediate, or WTI, is just shy of US$82 per barrel right now), helping shares of CNQ move to the higher end of its range. Up ahead, CNQ stock could be in a spot to break out to a new all-time high not seen since the first half of 2022.

At writing, shares of the big energy firm are going for 9.47 times trailing price to earnings. That’s still way too cheap for the $88 billion king of the Canadian energy patch, in my opinion.

Though oil price fluctuations are likely to cause additional volatility, I view the 4.49% dividend yield as more than worth any sort of wild ride. Currently, shares boast a 2.04 beta. That implies shares are a choppier ride than the broader market averages — no surprises there, though. Commodity stocks aren’t exactly known to be a smooth ride!

Further, if the Canadian recession isn’t as rocky as pundits expect, WTI prices may very well have a path back to the US$100. All considered, I view CNQ stock as sporting a terrific risk/reward tradeoff for contrarian investors who may wish to rotate their portfolios toward value.

Despite the modest price of admission, CNQ stock still has a good amount of summertime momentum behind it. Indeed, CNQ stock shows that you don’t need to choose between momentum and value.

The Foolish bottom line for investors

Canadian Natural Resources stock is down just 5.5% from its highs of $85 and change. In the second half, I think there’s a high chance the stock is well above this level should oil prices continue to inch higher.

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. The Motley Fool recommends Canadian Natural Resources. The Motley Fool has a disclosure policy.

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