Hillcrest Energy Technologies. (CSE: HEAT)
From concept to commercialization, Hillcrest is investing in the development of energy solutions that will power a more sustainable and electrified future.
In the backdrop of the transition to green and clean energy, wind, solar, and even nuclear power may represent the future of energy. However, traditional energy sources, including oil and gas, are far from being phased out. The Canadian energy sector remains a prime pool for investors seeking substantial cash flow and relative value.
The transition to green energy is a process that will span many years, even decades. The stability of the new energy supply systems remains relatively low, making short-term supply bottlenecks likely. Traditional energy sources like natural gas, oil, and coal continue to be essential supplements. The undeniable reality is that hydrocarbons cannot be completely replaced; oil remains the highest percentage of the global energy mix, followed by coal and natural gas (according to 2022 data).
During the debates at the end of June, President Joe Biden’s poor performance significantly increased the odds of a victory for Donald Trump. If Trump ultimately wins the election, it could be favorable for oil and unfavorable for renewable energy. Trump has previously promised oil companies he would revoke Biden’s electric vehicle and wind energy policies and reverse the Biden administration’s measures against the fossil fuel industry. The U.S. is currently the world’s largest oil and natural gas producer and has become a net exporter of these resources.
In addition to the potential tailwind from U.S. elections, energy stocks are currently attractively valued. The rapid growth of artificial intelligence (AI) is expected to bring substantial profits and ample cash flow to these companies. Meanwhile, investors need not worry about these top-performing energy stocks being value traps.
Over the next 18 months, the following two Canadian energy stocks are expected to outperform the TSX Index:
TC Energy Corp（TSX:TRP） is a cash cow in the Canadian midstream energy sector, yet the stock is very cheap, with a current P/E ratio of just 19.9. The dividend yield of this pipeline stock is as high as 7.36%. Recently, investors approved the spinoff of TC Energy’s crude oil pipeline business, which will lean the company more towards natural gas. Additionally, the spinoff could unlock hidden value in the company’s various businesses.
For those who believe oil prices will remain high for an extended period, Cenovus Energy Inc (TSX:CVE) is a solid pick. This midstream energy company is not sensitive to oil price fluctuations. Cenovus’s stock behaves more like a utility, especially post-spinoff. This Canadian energy producer is very affordable, with a P/E ratio of only 11.4 and a dividend yield of 2.68%, with room for more growth. Lastly, thanks to increased production, the company’s first-quarter earnings exceeded expectations.
