2 Stocks to Mirror Warren Buffett’s Big Oil Bets
Warren Buffett has been quite bullish on big oil stocks of late, and there’s a good reason why. The Russian invasion of Ukraine could leave Russian oil out of the equation for many years to come. Even if there’s a peaceful resolution to the conflict in Ukraine, many nations are unlikely to look to Russia again for energy. That’s a major source of supply that could go dark for some undisclosed time. With WTI above US$100, I believe there’s some pricing in of a blow-off top in select oil plays. Indeed, many oil investors got hurt last time they chased oil stocks when WTI surge above US$100.
While oil could fade back to the double digits, I think there’s a strong case for oil remaining stronger for longer. It took a geopolitical crisis, but I think Warren Buffett is wise to load up on energy stocks. Though the U.S. oil plays have had a run, I wouldn’t hesitate to chase them on the way up. They’re still cheap, but for a better value, I believe Canadians have a lot more to gain by sticking on this side of the border. Alberta’s oil sand players have tended to trade at a big discount. But moving forward, the WTI-WCS discount could shrink and propel many of the energy darlings we all know and love here in Canada.
In this piece, we’ll have a closer look at two Canadian energy stocks you can buy to mirror Warren Buffett’s bullishness in fossil fuel stocks.
Suncor Energy (TSX:SU)(NYSE:SU) has gotten the attention of activists. Indeed, change may be needed to make the most out of the company’s wonderful assets. Though the mix isn’t optimal, I think activist involvement will only act as a spark to create even more value for shareholders in these favourable conditions. The stock is up 73% over the past year. That’s hardly a return to complain about. But if activists get their way, I wouldn’t be surprised to see even more gains.
At 16.7 times trailing earnings, Suncor stock is a bargain that Canadians should add to the top of their shopping lists this May. The 3.6% yield is just the cherry on top!
Cenovus Energy (TSX:CVE)(NYSE:CVE) is a riskier energy bet, as it can blast off on oil price strength or fold quickly on weakness. At a time like this, I think Cenovus is a magnificent bet as the “higher-for-longer” type of environment is likely here to stay for at least a few years. When oil crumbled in 2020, I urged investors to buy the dip in Cenovus Energy stock. It seemed reckless at the time, but if you went against the grain, you’d be quite happy with your gains today. The stock is up 130% over the past year. That’s an incredible gain, and I don’t think it’s over yet.
Cenovus is levered to oil, and it’s hard at work on efforts that can reduce costs and breakeven prices. Indeed, higher oil bodes very well for the $37 billion integrated oil and gas firm. It’s effectively a 10-bagger since its 2020 bottom, CVE stock has profoundly rewarded those who stood by it. I think a move towards all-time highs of $40 per share is reasonable. As such, I wouldn’t hesitate to be a buyer on strength.
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* Returns as of 4/14/22
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Fool contributor Joey Frenette has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
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