fbpx

Warren Buffett: Suncor Stock Is a Top TSX Pick to Buy Right Now

Group of industrial workers in a refinery - oil processing equipment and machinery

Investors looking for value in today’s market have to search high and low to find what they’re looking for. Stocks are the most expensive they’ve every been by some metrics. Indeed, investing with a Warren Buffett-type methodology can be painful in times like these. When growth stocks outperform value like they have this past decade, investing with a value tilt can result in underperformance. Even worse, investors might be enticed by a “fear of missing out” and jump into stocks they might otherwise never have considered previously.

For those looking to stick with Warren Buffett’s proven long-term investment strategy, Suncor Energy (TSX:SU)(NYSE:SU) is the perfect stock to consider today. Here’s why.

Buffett’s not only holding, he’s buying more

As I stated in a recent article, Buffett is sticking with Suncor right now. Not only that, over the past two years, the Oracle of Omaha has nearly doubled his investment in this stock.

Suncor has been a laggard of the market and hasn’t performed well over since the pandemic began. When one considers the fact this stock was trading around the $40 level for most of 2019, its current share price, which is around $23, means there’s a lot of value investors believe has been destroyed with this stock. However, it appears Buffett sees things differently and has stood by this Canadian energy name.

I think this is a best-in-class oil company with an asset portfolio that is unparalleled among its peers. The company has a 40-year reserve life in Alberta, providing investors with long-term durability and the ability to benefit from rising oil prices long term. If you believe, as I do (and apparently Buffett does as well), that a bull market in commodities is underway, now is the time to buy a stock like Suncor.

Suncor’s business model extremely attractive

In addition to the company’s impressive reserves, Suncor’s vertically integrated business model is attractive to long-term investors. Suncor has four downstream oil refineries as well as approximately 1,500 Petro Canada gas stations. Thus, lower input prices actually increase the profitability of Suncor’s downstream businesses. Accordingly, Suncor’s overall exposure to oil prices is lessened, and investors are able to rely on a more stable and steady cash flow stream over time.

Bottom line

In my view, the value of these high-quality assets is not reflected in the company’s share price today. I think Suncor’s stock is undervalued, and Buffett sees this. Indeed, following in the footsteps of one of the greatest investors of all time has rarely turned out to be a bad move.

There are certainly some risks with oil companies like Suncor. Such companies are price takers and are beholden to commodity prices. Oil prices have been proven to be highly volatile of late. Accordingly, and some investors might not want this volatility in their portfolios.

That said, Suncor is a behemoth in the energy space. This stock has the backing of one of the greatest value investors ever. There’s not a lot to dislike about this stock, especially at these prices.

Like this top Warren Buffett-approved value pick? Here are a few picks we think could outperform long term at The Motley Fool:

Just Released! 5 Stocks Under $49 (FREE REPORT)

Motley Fool Canada‘s market-beating team has just released a brand-new FREE report revealing 5 “dirt cheap” stocks that you can buy today for under $49 a share.
Our team thinks these 5 stocks are critically undervalued, but more importantly, could potentially make Canadian investors who act quickly a fortune.
Don’t miss out! Simply click the link below to grab your free copy and discover all 5 of these stocks now.

Claim your FREE 5-stock report now!

More reading

Fool contributor Chris MacDonald has no position in any of the stocks mentioned.

The post Warren Buffett: Suncor Stock Is a Top TSX Pick to Buy Right Now appeared first on The Motley Fool Canada.


Read More
The Motley Fool Canada

World 24