Why is Enbridge so Cheap?

Investors underestimate how long legal battles last.

Andrew Willis 4 June, 2021 | 4:29AM
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Andrew Willis: Each week we talk about a stock that we think is either too cheap or too expensive – and why!

Let’s talk about a rare triple threat – Enbridge. This Canadian Oil and Gas major has a wide moat, pays out decent dividends, and is very undervalued. But why?

Part of it is pipelines. There are worries about a potential shut down of a section of the cross-border Line 5 pipeline. The governor of Michigan had until May 12th to shut it down – and well, it’s still running. The stock price has been falling since that deadline, but we’re maintaining our fair value estimate and wide moat rating – because we believe that until the dispute is resolved, the oil continues to flow.

Sector strategist Stephen Ellis notes that the potential economic impact, loss of jobs, and product supply issues will need to be addressed before we see a shutdown. And besides, Enbridge has already started work on replacing that section of the pipeline…

For Morningstar, I’m Andrew Willis.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Enbridge Inc49.43 CAD-1.08Rating

About Author

Andrew Willis

Andrew Willis  is Content Editor for Morningstar.ca. Follow him on Twitter @AndrewWillisCDN.

 

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