Warren Buffett: Now Is the Time to Buy Suncor (TSX:SU) Stock
The Motley Fool
Published Oct 27, 2020 13:00
Updated Oct 27, 2020 13:15
Warren Buffett: Now Is the Time to Buy Suncor (TSX:SU) Stock
Suncor Energy (TSX:SU)(NYSE:SU) is a Calgary-based company that is one of the largest integrated oil producers in the country. Shares of Suncor have dropped 59% in 2020 as of close on October 26. Earlier this month, I’d discussed Warren Buffett’s faith in this Canadian energy beast.
Today, I want to discuss why Buffett has stuck with Suncor. Moreover, I want to explore why now may be the perfect time to load up on this top Canadian energy company. Let’s dive in.
Why Warren Buffett is keeping the faith in Suncor In another article, I’d discussed why Warren Buffett had bailed on stocks like Restaurant Brands while continuing to stash Suncor. Indeed, Buffett has maintained minimal exposure to Canadian equities. At the time, I’d suggested that Buffett was sticking with Suncor due to its longevity, value, and income offerings.
Suncor stock last possessed a price-to-book value of 0.6. This puts the stock in favourable value territory relative to industry peers. Its shares had hovered around technically oversold territory for much of September, and it has failed to rise above neutral levels in October. It dropped its quarterly dividend payout to $0.21 per share earlier this year. Fortunately, this still represents a strong 5.1% yield.
Leadership at this Canadian energy giant has boasted that its oil sands business will be able to last into the next century. Warren Buffett historically seeks value in what he considers to be high-quality companies that are viable for the long term. Suncor is facing headwinds due to new energy trends, but it does not look like it is going anywhere.
What to expect for this energy heavyweight for the rest of 2020 Investors can expect to see Suncor’s third-quarter 2020 results on the morning of October 29. What should shareholders and onlookers expect? Oil and gas prices have stabilized somewhat, but low demand have put a cap on the comeback. OPEC is working hard to keep production down. Countries have moved forward with strict restrictions in response to the COVID-19 pandemic, especially in Europe. Because of this, a sharp rebound for oil and gas prices will be elusive in the near term.
In Q2 2020, Suncor’s earnings were weighed down by the dire lack of demand. Funds from operations came in at $488 million compared to $3 billion in the prior year. Still, Warren Buffett and Suncor shareholders are betting on a return to form in the year ahead. Like many industries, the oil and gas sector are also holding out hope for a COVID-19 vaccine.
Verdict: Should you follow Warren Buffett and buy Suncor stock? There has been positive movement on a vaccine approval in recent weeks. Still, assuming we see approvals in late 2020, top nations do not expect widespread distribution until the spring of 2021. This means a recovery for Suncor may not be forthcoming in the near term. That does not mean investors should stray away from Warren Buffett’s path. Suncor offers nice value, rock-solid income, and a monster footprint in a sector that is very much alive and ready to thrive again.
Get The App
The post Warren Buffett: Now Is the Time to Buy Suncor (TSX:SU) Stock appeared first on The Motley Fool Canada .
Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool recommends RESTAURANT BRANDS INTERNATIONAL INC.
The Motley Fool’s purpose is to help the world invest, better. Click here now for your free subscription to Take Stock, The Motley Fool Canada’s free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Motley Fool Canada 2020
This Article Was First Published on The Motley Fool
Written By: The Motley Fool
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.