The energy market continues to be quite volatile for today’s investors. High interest rates, inflation, and geopolitical issues continue to weigh on the sector. And so, some trouble remains for certain energy stocks on the TSX today.
So today, we’re going to identify one stock that investors may want to stay away from (for now at least), and instead consider another stock for a potential bull run in 2024.
Avoid Parkland for now
Calgary-based fuel retailer Parkland (TSX:PKI) is experiencing turmoil after an activist investor stated that the board needs a complete overhaul after the resignations of two of its board members. Rather than have current board members pick and choose, Engine Capital LP suggested in a letter this week that the largest shareholders should reconstitute the board of directors.
The activist investor group has been making these demands for almost a year now, when it urged the stock to sell or spin off its refinery. That would have made it a pure-play fuel and convenience retailer. Now, two board members have resigned from the board and left to join Parkland’s largest shareholder, Simpson Oil.
Engine Capital is hoping the $8-billion company won’t fight a multimillion-dollar legal battle with Simpson Oil, and instead will focus on this board-of-director refresh. So now, it remains at a crossroads. And investors may not want to risk being run over in the process.
Instead, consider this stock
So instead of risking it on Parkland stock, it might be a better idea to consider other stocks in the Canadian energy sector. And this can be increasingly difficult if you’re looking for stocks offering both value and growth.
In particular, analysts like Arc Resources (TSX:ARX) as a strong choice among gas stocks. Especially as fundamentals improve through 2025. The $12.3-billion company has seen shares rise 21% in the last year as of writing, while still offering a strong 3.32% dividend yield as well.
ARX stock continues to be in a unique position among energy stocks. It has a strong organic growth story, but has remained flexible to keep capital returns rising higher and higher. And with shares trading at just 7 times earnings, it still offers major value. Even though shares have soared in the last year!
Now is also a great time to buy as we head into earnings season. There is likely to be another boost in share price as investors slowly but surely realize the stock is set to recover even more. With earnings due the beginning of February, investors may want to get in on this dividend and growth story before it’s too late.
Nothing lasts forever, and Parkland stock will certainly see better days in the future. No matter what that future holds. But right now, it remains too risky with the latest activist report coming out. Instead, it might be best to sit on the sidelines until the company figures out what it will do.
Meanwhile, ARX stock has proven it can achieve greatness even in a volatile environment. It managed 2023 well, and with a soft landing predicted for 2024, should see even more growth in the near future. So it’s definitely worth your time on the TSX today.