Crescent Point Energy Corp. or Teck Resources Ltd.: Which Is a Better Bet Today?

Crescent Point Energy Corp. (TSX:CPG)(NYSE:CPG) and Teck Resources Ltd. (TSX:TECK.B)(NYSE:TECK) are two of Canada’s top resource stocks. Should one be in your portfolio?

| More on:
The Motley Fool

Contrarian investors are following beaten-up names in the Canadian resource sector and wondering which ones might offer some solid upside potential.

Let’s take a look at Crescent Point Energy Corp. (TSX:CPG)(NYSE:CPG) and Teck Resources Ltd. (TSX:TECK.B)(NYSE:TECK) to see if one deserves to be in your portfolio right now.

Crescent Point

Crescent Point used to be a dividend star in the energy patch, but the extended rout in the oil market forced the company to reduce its monthly dividend from $0.23 per share to $0.10 and then again to the current level of $0.03.

At the time of writing, the stock trades for close to $10 per share and provides a yield of 3.7%.

Most dividend investors want nothing to do with Crescent Point these days, and those who think the existing payout is safe might be disappointed in the coming months if oil doesn’t recover.

However, value investors are looking at the sell-off and thinking there might be an opportunity to score some big gains if oil stages a rebound.

Crescent Point owns an attractive resource base and is targeting 10% exit production growth this year, despite the ongoing challenges in the market.

The balance sheet remains in decent shape compared to many of its peers, and I wouldn’t be surprised to see a takeover bid from a larger player if oil stays under pressure heading into next year.

Remember, Crescent Point was a $45 stock just three years ago.

Teck

Teck is even more volatile than Crescent Point, sliding from $60 per share in early 2011 to as low as $4 in January 2016.

A recovery in metallurgical coal, copper, and zinc prices sent the stock soaring through the rest of last year, reaching $35 per share in November before giving back some of the gains.

Teck hit its 2017 bottom near $20 in June and has since rallied 30%, driven by another upswing in copper and zinc prices.

A weakening U.S. dollar might be largely responsible for the recent recovery, so investors should be careful chasing the rally. Ideally, the surge would be supported by strong global growth, especially in China, which doesn’t appear to be the case right now.

Teck is about to become a play on oil, too, due to its 20% stake in the Fort Hills oil sands project, which is scheduled to begin production later this year. The switch from development to production at Fort Hills should take some pressure off Teck’s capital program.

Debt was an issue in early 2016, but the company used some of the big profits in recent quarters to lighten the load. As a result, Teck’s balance sheet is now in much better shape.

Is one more attractive?

Both stocks offer big upside potential on a recovery in commodity prices, but they also have significant downside risk if things go south again.

If you simply want to bet on an oil recovery, Crescent Point is the better pick. If you think the base metals are poised to outperform, Teck should be in your portfolio, and you can pick up some oil exposure to boot from the Fort Hills asset.

At this point, more volatility should be expected in both names, so I would keep the position small.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Walker has no position in any stocks mentioned.

More on Energy Stocks

sources of renewable energy
Energy Stocks

Canadian Renewable Energy Stocks to Buy Now

Renewable companies in Canada are currently struggling through a challenging phase, but quite a few of them are still worth…

Read more »

oil pump jack under night sky
Energy Stocks

Is CNQ Stock a Buy, Sell, or Hold for 2025?

CNQ stock is down in recent months. Is a rebound on the way next year?

Read more »

a person looks out a window into a cityscape
Energy Stocks

2 No-Brainer Energy Stocks to Buy With $500 Right Now

Two low-priced energy stocks can reward investors who have limited capital with far superior returns than expensive peers.

Read more »

canadian energy oil
Energy Stocks

Where Will Suncor Stock Be in 1 Year?

Suncor Energy Inc (TSX:SU) stock is doing well this year. Will it still be doing well next year?

Read more »

A worker overlooks an oil refinery plant.
Energy Stocks

Best Stock to Buy Right Now: Cenovus vs Baytex?

It may not seem like a good time to buy most energy stocks, but there are always exceptions.

Read more »

A bull and bear face off.
Energy Stocks

Dividend Investors: Top Canadian Energy Stocks for November

These three dividend-payers are on a bullish uptrend.

Read more »

analyze data
Energy Stocks

Buy 8,850 Shares of This Top Dividend Stock for $2,000/Month in Passive Income

Let's do the math on what it would take to generate $2,000 a month in passive income from Enbridge (TSX:ENB)…

Read more »

oil and gas pipeline
Energy Stocks

Is TC Energy Stock a Good Buy?

TC Energy stock has a lot going for it, but there are also a few red flags to consider before…

Read more »