Suncor Energy Inc. USA (SU) — This integrated oil and gas company became one of Canada’s largest after the 2009 merger with Petro-Canada. Its drilling operations are focused on the vast Alberta oil sands, and it also engages in refining and marketing.
SU stock has suffered along with oil prices, dropping more than 25% in the past six months. Mark Fisher, chairman of MBF Clearing Corp., said Canadian companies offer the best value in this depressed sector.
The recent $8.3 billion bid by Repsol SA ADR (REPYY) for Calgary-based Talisman Energy Inc. USA (TLM) is considered to be a sign of further consolidation in the industry, which should benefit Suncor.
Despite the weakness in crude, S&P Capital IQ said it expects Suncor to generate positive free cash flows in 2015. Its analysts estimate operating earnings will rise 36% this year to $3.45 per share and be flat next year. They rate SU stock a “buy” with a 12-month target of $39, which is 23% above current prices.
On the weekly chart of SU stock, we see a buy signal from my proprietary internal indicator, the Collins-Bollinger Reversal (CBR), has been triggered. The recent low matches bottoms made in 2011, 2012 and 2013.
The daily chart below shows very heavy buying in the past four days, which, despite lower crude prices, drove SU stock to the middle of a channel down. This is considered a reversion to a mean and not a bottom. However, coupled with the strong buying, it is an indication that shares may have reached a bottom.
Traders should buy SU stock with a target of $38, the 200-day moving average. It may also represent a bottom-fishing opportunity for longer-term investors. The company pays an annual dividend of $0.98 per share for a current forward yield of 3.1%.
