Volatility is something many investors hope to avoid, and on the surface, that makes sense. Nobody enjoys watching stocks swing wildly from one week to the next. However, volatility also creates some of the best opportunities to buy high-quality Canadian stocks that you’ll ever get as an investor, as long as you can keep a long-term mindset.
That’s especially true lately after the war in Iran sent oil prices sharply higher, pushing many energy stocks up along with them. Now, as optimism grows about a sustained deal and fears of a prolonged conflict begin to ease, oil prices have pulled back, and many energy stocks have followed.
Therefore, many high-quality Canadian energy stocks are trading at much more compelling valuations today than they were just a few weeks ago. In fact, one of the best Canadian stocks to buy and hold for the long haul, Canadian Natural Resources (TSX: CNQ), is down nearly 20% from its peak.
And while short-term oil price swings can often grab the headlines, the best energy investments are built on much more than what crude does over the next few months.
And that’s exactly why Canadian Natural Resources looks like one of the best Canadian stocks to buy today and plan to hold forever.
A dominant business built to own for the long haul
One of the biggest reasons Canadian Natural Resources stands out is the size of its business and quality of its assets. The company owns a massive portfolio of long-life, low-decline assets that allow it to generate significant cash flow even when oil prices aren’t particularly strong.
In fact, CNQ’s break-even costs are among the lowest in the industry, with the company able to remain profitable at a West Texas Intermediate (WTI) oil price in the low-to-mid US$40s per barrel range.
That’s a huge competitive advantage because while many producers need strong oil prices just to generate attractive returns, CNQ can continue producing significant free cash flow across a wide range of commodity environments.
That’s one of the main reasons why it’s such a reliable Canadian energy stock to buy and hold for the long haul. Since nobody knows exactly where oil prices will be next quarter or next year, what matters is owning a company that can succeed regardless.
One of the best Canadian stocks to buy right now
In addition to the core operations that make CNQ so reliable, another significant reason why it’s one of the best Canadian stocks to buy and hold for years is what management is doing with all that cash flow.
In fact, as CNQ has continued to improve its operations in recent years, the company has already reduced its balance sheet significantly and is now returning a larger share of free cash flow directly to shareholders.
Today, CNQ returns roughly 75% of its free cash flow to investors through dividends and buybacks. And once it reaches its long-term net debt target of $13 billion, that figure will increase to 100%, which some analysts believe could happen as early as next year.
That’s why CNQ is such a reliable long-term investment. Investors aren’t just buying a high-quality energy company; they’re buying a business that could soon be returning essentially all its free cash flow directly to shareholders.
At the same time, the long-term outlook for the Canadian energy industry continues to improve.
Canada is investing heavily in expanding export infrastructure, increasing LNG capacity, and improving access to overseas markets. There’s also growing pressure to diversify exports beyond the United States and serve global demand more effectively.
And while those developments won’t happen overnight, they create a potentially powerful tailwind for high-quality producers over the coming decade.
That’s why the recent pullback looks far more like an opportunity than a warning sign. And not only is CNQ trading nearly 20% below its recent peak during the war, but its dividend yield is also sitting back above 4.2% again.
The Foolish takeaway
While short-term oil prices will always fluctuate and geopolitical headlines will always create volatility, the best opportunities for long-term investors often come exactly from these environments.
So, if you have cash on the sidelines you’re looking to put to work, there’s no question that Canadian Natural Resources still looks like one of the best Canadian stocks to buy, hold, and let compound for years.
