Oil prices have been going down for some time now. The current uncertainty and geopolitical problems might serve as a positive catalyst for oil prices, but other factors, like weak demand in Asia, are tugging them downward.
Even if things stabilize, it may be too ambitious to consider a strong bull market in the next few months. However, that doesn’t mean you must wait for the market to settle before buying oil stocks. A few no-brainer picks are worth considering if you have $1,000 to invest right now.
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A pipeline stock
Oil pipeline stocks tend to be safer bets than upstream and downstream companies, regardless of the market. But Enbridge (TSX: ENB) can be considered an even safer bet than other midstream giants. One reason for that is the extent of its business.
The company touches 30% of all crude oil produced in the continent, and about two-thirds of all Canadian oil and other liquids that reach the U.S. go through Enbridge pipelines.
This level of volume gives the company a significant edge. But another thing that makes it different from other oil stocks is its heavy natural gas lean and utility business.
From an investment perspective, Enbridge is usually a better buy for its dividends, but right now, it’s also worth considering for its growth potential. The stock has risen over 24% in the last six months, and the momentum may carry it forward. Despite its growth, the yield is still quite attractive at 6.1%.
An upstream giant
There are dozens of upstream oil companies in Canada, each with its own strengths and limitations. These influence their stock’s performance, resilience, and long-term return potential. In that regard, Canadian Natural Resources (TSX: CNQ) is easily one of the best choices. It has been a stable stock for most of the last two decades but did experience a decisive bullish phase in the post-pandemic market.
The oil price drop has taken its toll, and the stock is currently discounted (18.9% from its 2024 peak), but the impact is not as devastating as it could have been. One benefit of the slump is the inflated yield of 4.9%. It’s also quite attractively valued right now.
Another reason it’s a no-brainer oil stock is its position in the energy sector hierarchy. It’s the largest crude oil producer in the country and also boasts the most significant reserves (both oil and gas).
A Colombian oil company
Parex Resources (TSX: PXT) can be a good way to diversify your oil investments. While it’s a Canadian company, it operates almost exclusively in Colombia. Despite its modest market capitalization, it’s one of the largest independent oil producers in that country.
It’s also heavily discounted right now, trading at about a 48% discount from its five-year peak. While this may not seem very promising, it does make the stock attractive in two ways. The first is the valuation. Parex is currently the most undervalued energy stock in Canada right now, with a price-to-earnings ratio of just four.
The other is dividends. The company is currently offering them at a mouth-watering yield of about 10.3%. Despite the dangerously high yield, the payout ratio is rock solid, endorsing the financial stability of the dividends.
Foolish takeaway
The three energy stocks are worth considering right now: two because of their discounts and one (Enbridge) because of its current bullish momentum. They are also healthy long-term picks, all three because of their dividends. While Parex is on track for that, the other two are well-established Dividend Aristocrats.
