If you’re looking to invest at the moment, you can’t go wrong with energy and technology stocks. There has been constant fluctuation over the last decade but many companies are making a come-back as the economic stress of the pandemic begins to settle.
Canada’s prices in oil and gas have gained momentum over the last year and are forecasted to keep growing as the demand for oil has been high while countries prepare for the supply needed after threats of COVID-19 fade. Technology has also seen impressive growth over the last year as many companies have expanded and adapted to the needs of those shifting to remote working models.
The thing all these companies have in common is that they benefit from strong cash flow and have solid management teams and asset bases. Here are some stocks to watch over the coming weeks.
Suncor Energy (TSX: SU) (NYSE: SU)
Canadian energy company, Suncor leads the market in oil sands, exploration, refining, and marketing. Suncor is one of many companies that are trying to clean up their footprint and work on reducing carbon emissions; their stock is expected to gain strength due to growing oil and gas prices. What also makes this company so appealing to investors is its integrated business model. The Motley Fool noted that Suncor will benefit from “rising oil and gas prices while being sheltered from price swings.”
Within the last quarter, the company’s cash flow has doubled from $1 billion in Q1 2021 to $2 billion. This can be attributed to rising commodity prices throughout the Canadian economy, “but it was also helped by Suncor’s relentless focus on cost reductions.”
Canadian Natural Resources (TSX: CNQ) (NYSE: CNQ)
Known for their top-tier oil and gas stock, Canadian Natural Resources has been on investor's radar due to the company’s long lifespan and their low-decline assets. Their stock has bounced back over the last year due to large amounts of cash flow; in Q1 their operating cash flow grew by 60% and expected to come in at almost $8 billion USD by the end of the year. The highly predictable stock requires comparatively low capital expenditures and has an asset base that is “resilient, diversified and flexible.”
Right now, Canadian Natural’s cash flow is being used to shrink debt, but investors should be prepared to see a dramatic increase as, the “company has a history of 21 years of growing its dividend at a compound annual growth rate of 20%. The company increased its dividend by another 11% this quarter.”
Cenovus Energy (TSX: CVE) (NYSE: CVE)
Cenovus leads the way in oil sand production and on top of that has assets in natural gas and conventional oil. Recently many investors have been watching to see how the company will stabilize after acquiring Husky Energy; the anticipated result is that “the company now stands to gain big off of the significant amount of synergies.” Cash flows are expected to increase greatly over the coming months which will peak investor's interest this summer.
Salesforce Inc (NASDAQ: CRM)
Have been at the forefront of investor’s minds throughout the last year and have been more attracted to the stock based on how countries are easing out of the pandemic. According to the Insider Monkey, “Fisher Asset Management raised its position in Salesforce by 3% to 1.93% of the overall portfolio at the end of the first quarter.”
Investment Management firm Polen Capital noted that the recent dip in Salesforce stock is a prime buying opportunity. Following the acquisition of Slack for $28 billion, the company’s stock has been in flux due to the process of integration but as soon as the company stabilizes, traders anticipate a surge in the company’s share prices.
Polen Capital stated that “although the purchase price is high in absolute dollars it represents less that 15% of Saleforce’s market capitalization” and expects the company to continue gaining earnings and free cash flow growth moving forwards.
Tencent Holdings Limited (OTC: TCEHY)
Tencent Holdings Limited is an investment holding company based out of China and has been a member of Fisher Asset Management’s portfolio since 2012. The company has been working on providing value-added services (VAS) and online advertising services while offering online games and social network services.
The company’s revenue has been growing fast over the last few years; Tencent Holdings added more than 900,00 shares to its existing position during the first quarter this year and “shares grew 6.5% since the beginning of this year, extending the twelve-month gains to 36%.”
Adobe Inc (NASDAQ: ADBE)
Software company Adobe has seen bullish tendencies as Ken Fisher debates the future of the company. After initiating a stake in the company in 2018, the firm has raised their existing stakes by 3% to 2.01% of the overall portfolio in the first quarter, and investors have been following up after Adobe’s strong performance in 2020.
Polen Capital stated that Adobe is a great example of first-quarter rotations, holding a strong position in the market. Having “higher leverage and lower profitability”, Adobe’s stocks gained popularity over the past quarter. The company shares have “low leverage, high levels of profitability, high recurring revenues that mitigate cyclicality” which are all beneficial market factors investors are considering.
By Surina Nath