3 Canadian Commodity Stocks to Buy as the Global Economy Rebounds

The next commodities boom is underway. These stocks could outperform the broader market through the end of 2021 and into next year.

| More on:

Commodity stocks are already catching a nice tailwind, but there could be a lot more upside in the next few years.

Teck Resources

Teck Resources (TSX:TECK.B)(NYSE:TECK) is Canada’s largest diversified mining company with operations that produce coal for making steel, copper, and zinc. Steel prices are soaring amid a surge in global demand. Copper has more than doubled its price off the 2020 lows, and zinc demand remains robust.

Looking ahead, these commodities should perform well and drive strong cash flow for Teck Resources and its investors. Copper, in particular, is one to watch. The base metal is a key component in the manufacturing of solar panels, wind turbines, and electric vehicles.

Significant stimulus spending is directed at renewable energy projects in Europe, and ESG is playing a key role in new investment decisions being made by institutions that manage hundreds of billions of dollars for their clients. Copper demand should be robust for the next few years.

Teck Resources is down about 10% from the 2021 high, giving investors a chance to buy on the latest pullback. The stock can be volatile, but the general trend in the next 12-18 months should be higher.

Nutrien

Nutrien (TSX:NTR)(NYSE:NTR) is a leader in the global crop nutrients industry, supplying countries like China and India with potash on large wholesale contracts. The company also sells potash, nitrogen, and phosphate in the spot market. On the retail side, Nutrien provides seed and crop protection products to farmers around the world. And its digital solutions division helps farmers manage their businesses more efficiently.

Nutrien recently announced it will boost potash production in the second half of 2021 to meet growing demand. The strong trend is expected to continue, as high crop prices put more money in the pockets of farmers and encourage the planting of extra acreage.

The company has increased its EBITDA guidance for the year and could surprise to the upside when it reports Q2 2021 results. Nutrien’s share price is already up 25% in 2021, but the stock still appears undervalued. This company has the potential to generate massive free cash flow when crop nutrient prices move higher. The sector could be in the early innings of a meaningful rally after enduring several years of weak prices.

Baytex Energy

Baytex Energy (TSX:BTE)(NYSE:BTE) traded for more than $48 per share seven years ago when oil traded near US$100 per barrel. The plunge in oil prices and subsequent dividend cuts sent Baytex Energy stock tumbling. Investors feared the high debt taken on to make a major acquisition at the peak of the market would eventually bury the firm.

At the nadir last year, Baytex stock was $0.40 per share. Today, the stock trades near $2.15, and more upside could be on the way.

The rebound in oil prices in Q4 2020 and through the first part of 2021 looks like it has legs to run. WTI currently trades above US$70 per barrel, and many analysts are calling for a 2021 high near US$80. Some bulls even see a surge to US$100 occurring in the next two or three years.

This stock is unlikely to head back to $48, but a double off the current price wouldn’t be a surprise on a sustained oil rally.

The bottom line

Teck Resources, Nutrien, and Baytex Energy should benefit from a rebound in commodity prices in the coming months and through next year. Some volatility should be expected, but commodity bulls might want to consider adding these stocks to their portfolios today.

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.

The Motley Fool recommends Nutrien Ltd. Fool contributor Andrew Walker owns shares of Nutrien.

More on Energy Stocks

A solar cell panel generates power in a country mountain landscape.
Energy Stocks

Top Canadian Renewable Energy Stocks to Buy Now

Here are two top renewable energy stocks long-term investors can put in their portfolios and forget about for a decade…

Read more »

oil and gas pipeline
Energy Stocks

Where Will Enbridge Stock Be in 3 Years?

After 29 straight years of increasing its dividend and a current yield of 6%, here's why Enbridge is one of…

Read more »

Pumpjack in Alberta Canada
Energy Stocks

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

Enbridge stock just hit a multi-year high.

Read more »

oil pump jack under night sky
Energy Stocks

Where Will CNQ Stock Be in 3 Years?

Here’s why CNQ stock could continue to outperform the broader market by a huge margin over the next three years.

Read more »

engineer at wind farm
Energy Stocks

Invest $20,000 in This Dividend Stock for $100 in Monthly Passive Income

This dividend stock has it all – a strong outlook, monthly income, and even more to consider buying today.

Read more »

A worker overlooks an oil refinery plant.
Energy Stocks

Is Imperial Oil Stock a Buy, Sell, or Hold for 2025?

Valued at a market cap of $55 billion, Imperial Oil pays shareholders a growing dividend yield of 2.4%. Is the…

Read more »

Pumpjack in Alberta Canada
Energy Stocks

Where Will Imperial Oil Stock Be in 1 Year?

Imperial Oil is a TSX energy stock that has delivered market-thumping returns to shareholders over the last two decades.

Read more »

Pumpjack in Alberta Canada
Energy Stocks

1 Magnificent Energy Stock Down 17% to Buy and Hold Forever

Down over 17% from all-time highs, Headwater Exploration is a TSX energy stock that offers you a tasty dividend yield…

Read more »