The 3 Best Energy Stocks to Buy When They Correct

Energy stocks need active investing, because they move meaningfully as commodity price changes. When they dip, buy the best energy stocks.

| More on:

Energy stocks are swayed easily by the oscillation of the underlying commodity prices. One day, they can be in the green on good news. The next day, they can be in the red from bad news. If you’re feeling lucky, you can consider buying energy stocks on dips but, ideally, during more meaningful corrections. Here are three of the best energy stocks I have on the top of my watchlist.

Tourmaline Oil

Eric Nuttall is an expert in energy stocks as a lead portfolio manager of the Ninepoint Energy Fund since March 2010. So, when he talks, investors who are interested in energy stocks should listen. At the beginning of the month, he commented on Tourmaline Oil (TSX:TOU):

“Tourmaline Oil is an extremely well-run company with decades of inventory. He doesn’t own the stock because it’s natural gas weighted. Oil presents huge opportunities. Expecting over US$100/barrel for the next four to five years. It’s trading at about three times cash flow. We expect variable dividends to be paid out and share price to trade around $80 per share.”

Eric Nuttall, partner and senior portfolio manager, Ninepoint Partners

Although Nuttall doesn’t own the energy stock, he is still positive about its management. He just prefers more oil-weighted companies at the moment as oil prices hover above US$100 per barrel. For reference, Tourmaline is about 77% weighted in natural gas.

At just under $56 per share at writing, TOU stock yields 1.4% and offers 12-month upside potential of about 22% based on the analyst consensus price target of $68.46. So, Nuttall’s target of close to $80 is probably a multi-year price target.

Whitecap Resources

Nuttall also likes Whitecap Resources (TSX:WCP). Earlier this month, he highlighted it:

“Whitecap stock is trading at about two times free cash flow yield and 30% cash flow yield at US$100 oil. It’s increasing its dividend and paying down debt. A five times multiple would imply a roughly $20 share price. It’s a good company that is presenting a great opportunity to buy [at about $10 per share].”

Eric Nuttall

At the time of the comments, Nuttall owned oil-weighted Whitecap Resources stock. For reference, WCP is roughly 27% weighted in natural gas.

At $10.54 per share at writing, it yields 3.4% and offers 12-month upside potential of about 24% based on the analyst consensus price target of $13.11.

Parex Resources

I saved the best for last. Both Eric Nuttall and Brian Madden have Parex Resources (TSX:PXT) as one of their top stock picks this month.

“Parex Resources is an exploration-focused company. It has been returning one-third of its free cash flow back to shareholders. The CEO could do better at marketing the company.”

Eric Nuttall

“It is a mid-sized Canadian company with a unique asset base. It produces about 53,000 barrels a day — all in Colombia. Parex has one of the highest net backs. It is growing at 12% this year and has grown at a compound rate of 9% over the past five years, Management has concentrated on creating shareholder value. It has grown cash flow per share at 365% in total over the past five years and is buying back shares. It has no debt and has $375 million in cash. It is the one to own and he is still buying.”

Brian Madden, chief investment officer at First Avenue Investment Counsel

Parex is roughly 96% weighted in crude oil production. At $26.63 per share at writing, it yields 2.1% and offers 12-month upside potential of almost 45%.

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 has no position in any of the stocks mentioned. Fool contributor Kay Ng has no position in any of the stocks mentioned.

More on Energy Stocks

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 »

Pumpjack in Alberta Canada
Energy Stocks

Is Cenovus Energy Stock a Good Buy?

Cenovus Energy (TSX:CVE) stock is primed for capital gains and strong total returns in 2025, driven by strategic buybacks and…

Read more »

Trans Alaska Pipeline with Autumn Colors
Energy Stocks

2 High-Yield Dividend Stocks That are Screaming Buys Right Now

Natural gas stocks like Peyto Exploration and Development are yielding above 7% today and look undervalued as natural gas strengthens.

Read more »

chart reflected in eyeglass lenses
Energy Stocks

Best Stock to Buy Right Now: Canadian Natural Resources vs Cenovus?

Want to invest in Canadian energy? Canadian Natural Resources and Cenovus Energy are two of the largest, but which one…

Read more »

oil pump jack under night sky
Energy Stocks

Where Will Cenovus Stock Be in 1/3/5 Years? 

Let's dive into whether Cenovus (TSX:CVE) stock is worth buying right now and where this stock could be headed over…

Read more »

Pumpjack in Alberta Canada
Energy Stocks

Best Stock to Buy Right Now: Canadian Natural Resources vs Suncor?

These energy giants are returning significant cash to shareholders.

Read more »

how to save money
Energy Stocks

This 7.8% Dividend Stock Pays Cash Every Month

This monthly dividend stock is an ideal option, with a strong base, growing operations, and a strong future outlook.

Read more »

data analyze research
Energy Stocks

The Smartest Dividend Stocks to Buy With $2,000 Right Now

Dividend stocks like Canadian Natural Resources (TSX:CNQ) can amplify your wealth.

Read more »