[james4beach]

Now here is an incredible stock. It is dramatically outperforming its sector, check out this chart of Suncor price divided by XEG
http://stockcharts.com/h-sc/ui?s=SU.TO:XEG.TO&p=D&yr=5&mn=0&dy=0&id=p58124875815

If you're a shareholder, you've really picked a winner here. That's an amazing 5 year outperformance. The sector may be doing horribly, but you're doing the best anyone can hope for within that sector.

Here's the opposite case. Barrick Gold versus the gold sector:
http://stockcharts.com/h-sc/ui?s=ABX.TO:XGD.TO&p=D&yr=5&mn=0&dy=0&id=p73165109168

 

[james4beach]

Suncor cut its dividend 55%

Suncor Cuts Dividend 55%, Chops Capital Spending Again - BNN Bloomberg

 

[james4beach]

Suncor shows a forward P/E of 7.4 right now, suggesting it's pretty damn cheap.

But I wonder if their forward guidance can be relied upon. As you can see in this release, Suncor is assuming $97 WTI oil in 2022 which seems like an optimistic assumption to me. I'm curious what others think.

 

[james4beach]

Some analysts are suggesting that sustained $180 oil is the price that would level out supply and demand, whether or not that causes a recession. Currently at $120 but refining margins are $60 or higher - implying today's demand could already support an oil price above $150 if refining margins were just an "abnormally high" $30.

Wouldn't surprise me at all to see oil double. Oil seems incredibly cheap for the utility we get out of it.

But anyway I don't want to make wild guesses at oil prices. Thanks for your earlier comment about Suncor's assumptions. Seems like a safe estimate to say their forward P/E is somewhere between 5 and 9. Either way, this is a cheap stock.

I'm long XEG

 

[james4beach]

Can anyone explain the downside?

The Chinese economy is slowing, and the US could enter a recession if there's a change of fortunes. So global demand could plummet.

The war could end, and oil markets could bounce back to normal. Maybe the price of oil could fall a lot in this kind of scenario.

The sharp increase in interest rates and QT could even trigger some kind of financial crisis. You might recall that there was a similar energy & commodities scare in 2007/2008 right before all markets crashed. Oil went through the roof, and speculators aggressively pushed oil contracts higher, right before everything crashed.

I'm not saying that will happen but there are clearly risks. Nothing is a sure thing. Commodities could weaken, and people buying now could be buying at the peak.