Three energy producers with sizable mismatch between price and prospects

These well-managed, diversified businesses all trade well below their fair value estimates.

Vikram Barhat 14 March, 2018 | 5:00PM
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The North American energy sector is poised for a strong resurgence led by the United States as the major oil producer roars back to global dominance. In fact, oil production growth in the U.S. is expected to supply as much as 80% of the global oil demand growth for the next five years, while Canada, Brazil and Norway supplying the rest, according to Oil 2018, a five-year market forecast by the International Energy Agency (IEA).

The forecast could breathe a renewed sense of optimism in the energy sector, and boost the investment case for specific players, at a time when it appears to be struggling to shake off its spectacular underperformance last year. The Morningstar U.S. Energy Index has fallen more than 5% year-to-date (expressed in U.S. dollars) as of March 9, while the S&P/TSX Capped Energy Index has slipped more than 11% for the same period, picking up exactly where it left off in 2017.

With both the U.S. and Canadian energy sectors swimming in red, opportunistic investors may find much-needed and long-awaited entry points to buy into prominent energy producers at attractive discounts. These are well-managed, diversified businesses that stand to benefit from demand growth, rising oil prices and economic stability, and are able to withstand geopolitical events and negative headlines, according to Morningstar equity research.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Enbridge Inc52.87 CAD-0.62Rating
Enterprise Products Partners LP24.51 USD-0.75Rating
TC Energy Corp67.88 CAD-0.13Rating

About Author

Vikram Barhat

Vikram Barhat  Vikram Barhat is a Toronto-based financial writer specializing in investing, stock markets, personal finance and other areas of the financial services industry. He also writes for CNBC, BBC, The Globe and Mail, and Toronto Star.

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