While the abruptness of an oil rebound is difficult to project, investors would be better served by looking to firms with healthy cash flows and stellar balance sheets to avoid the risk of bankruptcy in a lower-for-longer oil price environment that will undoubtedly threaten the economics of many heavy crude producers in the Albertan oil sands.
Facts about Suncor energy
Warren Buffett’s preferred way to bet on the Canadian oil patch is Suncor Energy, and it’s not hard to see why. The company has stellar integrated operations and one of the healthiest balance sheets in the oil sands, with an optimal 0.43 debt-to-equity ratio and $2 billion worth of cash, cash equivalents, and short-term investments. The company is destined to be a survivor, even if oil prices were to ever flirt with the negatives again.
- 0.43 debt-to-equity ratio
- $2 billion worth of cash, cash equivalents, and short-term investments
After Suncor’s 76% bounce off the March bottom, the dividend yield is now more modest at 7%, but the Canadian oil stock is still worth picking up if you’re a long-term income investor who wants to invest alongside Buffett with a better cost basis!
Stay hungry. Stay Foolish.
My positions
Actionable Items
I need to pay attention to more than 10% gain in one day or one week, 50% gain in less than one month definitely should be under my review.
On April 7, 2020, there is more than 20% gain compared to my purchase price on March 27, 2020.
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