As market volatility returns to the broad markets, investors may wish to look to some of the less-loved, low-cost commodity plays as they look to zig while the rest of the market zags lower. Indeed, commodity plays have had quite the fall as tech stocks took charge over the past year.
Nobody knows when the tables will turn. That said, the recent wave of April volatility should, I believe, be a wake-up call for investors who’ve neglected the diversification factor. Indeed, it’s good to be heavy in growth stocks you believe in, especially for a long-term Tax-Free Savings Account (TFSA) fund.
That said, if a stock moves well above what you think it’s worth, a bit of trimming may be warranted. Though I’m not against holding a stock, even as it becomes a tad too frothy, we’ve seen some skyrocketing names that have surged double-digit percentage points in just a few weeks.
It’s these names that I think are ripe for profit-taking as we head into the warmer months. As the weather warms up, perhaps commodity plays could have a chance to fire back and earn a spot back in the portfolios of long-term investors.
In this piece, we’ll check out two of my favourite commodity plays to consider stashing away for years at a time.
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Suncor
Suncor Energy (TSX: SU) stock stands out to me as one of the cheapest large-cap ways to play Canada’s oil patch. With energy prices heating up on Thursday, perhaps investors lacking in high-quality energy names may wish to initiate a starter position on a play like SU stock. On a turbulent Thursday for stocks, Suncor finished the day relatively flat. On a big down day, that’s a win for Suncor.
Year to date, shares are up more than 22%. Yet the $67.3 billion energy firm still goes for an absurdly low 8.17 times trailing price to earnings to go with a 4.23% dividend yield. That’s incredibly cheap, given Suncor’s efforts to improve across various aspects of its business. I think Suncor’s on the right track and think a potential breakout could help it catch up (on valuation) with some of its energy rivals.
My takeaway? Suncor stock is a relative bargain for value investors who seek value, passive income, and long-term growth.
Cameco
If you’re feeling more venturous, perhaps uranium miner Cameco (TSX: CCO) is more intriguing, with its incredible past year of performance (up 92%). The bull market for uranium may very well last for many quarters, if not years. Though the easier money may have already been made in the top uranium play, I’d argue that value still exists in shares, especially if you can grab them on a pullback.
In February, shares plunged around 22% from peak to trough, eventually regaining ground following an incredibly upward spike in March. Though a return of nuclear energy could power more gains, I would look to average into a position rather than load up right here at all-time highs.
Be patient and a better time to back up the truck will present itself. I have no idea when it’ll be a screaming buy, but either way, it’s a great addition to any investors’ radar.
