You have $500 right now, with which you want to buy stocks. But all you see are stocks at their all-time high. And the stocks that fell in November are making you apprehensive. When in doubt, buy no-brainer energy stocks.
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Is now a good time to buy energy stocks?
Canada is among the largest oil producers in the world and the largest oil exporter to the United States. The U.S. Presidential election has set the stage for oil and gas companies for the next four years. Canadian companies are expecting approvals to boost production capacity and expand transmission infrastructure.
The president-elect Donald Trump is a supporter of oil. Amid the geopolitical tensions that have escalated oil prices, Trump’s presidency could also increase volumes.
The time is ripe to buy energy stocks while the market anticipates the new policies. Once Trump takes the oath and begins his term, the policies will become clear, and the market will adjust the stock price to new developments.
Energy stocks to buy with $500 right now
Canada is seeing an uptick in energy stocks as they make new highs. These stocks are not exactly a buy at the current price points if you are looking to stay invested for the long term. However, if you want to grab the rally and make some quick gains in a few months, they are worth betting on with $500.
Suncor Energy
Suncor Energy (TSX: SU) stock is trading at its second-highest level ever. The last time the oil giant crossed $57 was at the peak of 2008, just before the economic crisis. When the stock jumped to $70.80, it crashed in the downturn and never saw that peak again. Hence, I have been bearish about the stock, as oil is a commodity. The oil price can only rise to a certain point, and then it starts affecting demand and pulls the price down. This cyclicality makes Suncor a stock an attractive investment, in which you buy the dip and sell the rally. However, this is the case in a normal economy.
Now are different times. Instead of comparing the current scenario with 2008, one should look at oil prices in the 1970s. During 1973–74, the world faced an oil shock as the Yom Kippur War and the Israel Revolution created a supply shortage and hiked oil prices. At that time, there was no shale gas exploration, and countries started energy rationing by limiting flying and driving.
A similar risk is faced by European nations that rely heavily on Russian oil. War in major oil-producing and oil-transmitting countries (Russia-Ukraine, Israel-Hamas) has made North America the reliable oil and liquified natural gas (LNG) supplier to Europe. With North America finding a new market for its LNG, oil and gas stocks have been at their highs.
Trump’s presidency brings hope that oil production and exports will accelerate with faster approvals. And that is an opportunity to grab.
Do not hesitate to sell when the time comes
Suncor Energy stock is a buy even at its highest price, but only till the winter season, or for less than a year. Going back to the 1970s oil crisis, even after the shock subsided in 1974, oil prices remained high until the end of the decade, followed by an oil glut in 1980, when there was oversupply and oil stocks fell.
The uncertainty around oil prices could remain. If Trump boosts oil production, oil prices could fall slowing Suncor’s windfall gains. In response, the stock may rise in January and February and then see a correction, depending on any changes in U.S. energy policies.
Thus, one should know the risks that come with buying the rally.
