Avoid This Energy Stock (for Now) and Consider This Top Stock Up 21% Instead

Parkland stock (TSX:PKI) is at a crossroads that you may want to avoid, and instead consider this top stock that may be up, but still offers value!

Amy Legate-Wolfe

Author Bio Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Her work can also be found at Canada's National Observer, where she writes on the business side of climate action. Before joining Motley Fool Canada, Amy wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Social Media Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published January 24, 2024 4:10 pm EST

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.

oil and natural gas — Image source: Getty Images

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.

Bottom line

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.