What are we looking for?
Canadian oil stocks poised to pop on Middle East production news.
After a two-year policy of allowing the market to determine crude prices, there are signs that Saudi Arabia may be willing to install a floor under oil prices in the near future. Last week, Saudi Minister of Energy Khalid Al-Falih indicated that the OPEC leader was open to working with producer countries to regulate supply and boost crude benchmark prices. On Wednesday, data on U.S. crude inventories showed a drawdown of 2.5 million barrels, further contributing to the belief that Saudi Arabia may be ready to resume regulating prices.
The screen
We will be using Recognia Strategy Builder to search for Canadian energy stocks with strong analyst ratings that are showing signs of moving up in sync with higher oil prices.
We begin by setting a minimum market-cap threshold of $2-billion to focus on larger and more stable companies in the sector.
Next, we will look for companies with strong analyst ratings. We will select only those with analyst consensus ratings of Buy or Strong Buy.
Also, with the prospect of higher interest rates ahead, we will seek to focus on companies with low debt by filtering of debt-to-equity ratio.
We will pick only companies with debt-to-equity of 1.0 or less.
Last, to select companies with signs of technical strength, we will pick companies that have had a recent technical event in which the stock price has crossed the moving average in the upward (bullish) direction.
More about Recognia
Recognia is a global leader in automated quantitative analysis and engagement solutions for retail online brokers and institutions.
Recognia's product suite provides trading ideas based on technical and fundamental research covering stocks, ETFs, indexes, forex, options and commodities.
What did we find?
Oil sands producer Canadian Natural Resources Ltd. (CNQ) tops our list. Canadian Natural is Canada's largest oil producer with operations in Western Canada as well as the North Sea and West Africa. Canadian Natural is also Canada's largest producer of heavy oil from their Horizons oil sands operation. Since hitting a 52-week low in January, the stock has rallied 82 per cent.
Crescent Point Energy Corp. (CPG) is a Canadian producer of light and medium crude oil. On August 11, the company announced second-quarter results that beat analyst expectations by a wide margin. The stock has rallied more than 6 per cent on this news and is now up 33 per cent this year. In the past 10 days, the stock price has breached both its 50-day and its 21-week moving averages, indicating a likely continuation of the bullish trend.
Suncor Energy Inc. (SU) is an integrated oil company with operations tied to the production, distribution and retailing of petroleum. Suncor is also one of Canada's biggest oil producers with operations in the oil sands as well as on Canada's East coast, the North Sea and in Africa. With low debt-to-equity ratio of just 0.40 and strong production, Suncor is well positioned to benefit from a future bump in the price of crude.
The investment ideas presented here are for information only. They do not constitute advice or a recommendation by Recognia Inc. in respect of the investment in financial instruments. Investors should conduct further research before investing.
Peter Ashton is vice-president of retail and self-directed investing at Recognia Inc.