Why Cenovus (TSX:CVE) Stock Could Be 1 of the TSX’s Biggest Losers if Biden Wins the U.S. Election

Should you sell your shares of Cenovus Energy Inc (TSX:CVE)(NYSE:CVE) before it’s too late?

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The U.S. election is finally here, and there’s lots at stake. It’s not just Americans who will be impacted by Tuesday’s election results, but north of the border, many Canadian companies will also feel the effects if there’s a change in leadership in the U.S.

President Donald Trump has been partial to the oil and gas industry and has been in favour of projects like the Keystone XL. But if Joe Biden is elected president, there could be significant repercussions for the industry, and one stock that could be particularly vulnerable is Cenovus Energy (TSX:CVE)(NYSE:CVE). Fresh off an announcement that it would be acquiring Husky Energy, the company’s effectively doubling down its exposure to the industry. While the move could position it for long-term success and help achieve cost savings as the two Calgary-based energy companies join forces, it doesn’t make the investment any less risky.

Under Biden, the U.S. will likely move towards greener sources of energy. It may not be overnight, but a greater focus on climate change and initiatives steering the country away from oil and gas could decrease demand. Then there’s the supply side. Trump has been tough on Iran, placing sanctions on the country, which prevents its oil production to impact the markets. But if those sanctions are lifted or at least loosened, which many people expect will happen, then could lead to an influx of oil, which will only push down the price of the commodity. Over the past few years, Cenovus stock has closely tracked the price of a West Texas Intermediate (WTI), a key North American benchmark:

WTI Crude Oil Spot Price Chart

The danger is obvious: an increase in supply coupled with a decline in demand could send oil prices plummeting, which would likely take Cenovus stock down in the process, perhaps to an even greater degree now that its operations are more dependent on the commodity. A further danger is that the longer the coronavirus pandemic goes on, especially if there are lockdowns, the demand for oil may continue to suffer, which would only exacerbate Cenovus’s problems.

The company’s already coming off a few tough quarters where its cumulative losses totaled more than $2.2 billion over the past three periods.

Bottom line

Year to date, shares of Cenovus are also down 65%, and there may be no end in sight to the stock’s decline if Biden wins the U.S. election. While many oil and gas companies in Canada will undoubtedly be adversely impacted by the results, Cenovus is already in a difficult situation, generating negative free cash of $586 million over the past three quarters. Trading at a heavy discount of around 0.3 times its book value, investors have only been willing to buy the stock at a steep discount. And as the level of risk Cenovus faces rises, so too will that discount.

While it’s possible that the stock could turn things around if conditions in the industry improve, under a Biden win, that may not be all that likely. It could take multiple years before Cenovus stock rallies, potentially more if Trump isn’t re-elected.

Should you invest $1,000 in CGI Group right now?

Before you buy stock in CGI Group, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and CGI Group wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,058.57!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 38 percentage points since 2013*.

See the Top Stocks * Returns as of 2/20/25

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 David Jagielski has no position in any of the stocks mentioned.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Energy Stocks

A person looks at data on a screen
Energy Stocks

Enbridge Stock vs. Cameco: Which One Is a Better Buy on the Dip?

Consider Enbridge (TSX:ENB) and another great momentum play to energize your TFSA.

Read more »

man touches brain to show a good idea
Energy Stocks

Trump Tariffs: Are Canadian Energy Stocks Still a Safe Haven for Investors?

Amid Trump’s tariffs, can Canadian energy stocks still shelter your portfolio? Let's identify the risks and opportunities.

Read more »

grow money, wealth build
Energy Stocks

Down 30% From Highs: Is This TSX Growth Stock a Screaming Buy?

This TSX stock may be down now, but don't count it out. With plenty of growth opportunities already underway, now…

Read more »

A worker overlooks an oil refinery plant.
Energy Stocks

Dividend Investors: Top Canadian Energy Stocks for March

These two energy stocks have increased payouts and have strong outlooks, making them potentially ideal picks for dividend investors.

Read more »

oil and natural gas
Energy Stocks

3 Top Energy Sector Stocks for Canadian Investors in 2025

Despite ongoing uncertainty amid the tariff war with the U.S., these three TSX energy stocks can be strong long-term holdings…

Read more »

Oil industry worker works in oilfield
Energy Stocks

Is Whitecap Resources Stock a Buy for its 7.8% Dividend Yield?

Whitecap stock's recent merger with Velen sent shares dropping, but this could mean there's a value opportunity.

Read more »

oil pump jack under night sky
Energy Stocks

Canadian Natural Resources: Buy, Sell, or Hold in 2025?

This energy stock has certainly made an impression on investors in the past. But with tariffs coming down hard, what's…

Read more »

Offshore wind turbine farm at sunset
Energy Stocks

Best Stock to Buy Right Now: Brookfield Renewable vs TransAlta Renewables?

These two energy stocks look primed to explode, and at these prices, investors would do well to pick them up…

Read more »