(Idea) CNQ Is Going Higher

Canadian Natural Resources Shares Set To Rise With Improving Sentiment

By: Jon Costello

Note: Dollar values in Canadian dollars unless otherwise specified.

For weeks, Canadian E&Ps have relentlessly traded lower. However, today’s price action makes me optimistic that the worst of the E&P selling is behind us. Investors who have been waiting for the carnage to end should consider buying the highest-quality Canadian E&P, Canadian Natural Resources (CNQ:CA).

CNQ’s high-quality assets, top-notch management, production growth, and long reserve life make it a no-brainer for any investor seeking long-term oil price exposure. The stock is a particularly timely investment because it will be the first recipient of capital from large money managers once they turn bullish.

CNQ is timely at the moment because the shares will be one of the first Canadian E&Ps to receive capital inflows once large money managers decide to allocate to the sector. With the fundamental oil market backdrop improving—and sentiment likely to follow—that may not be too far off.

Once oil market bearishness dissipates, we expect CNQ shares to head back toward the $50 level. From today’s $43 stock price, this would represent a gain of more than 15%. Including dividends, investors stand to earn as much as a 20% total return over the next year. The return is particularly attractive given the company’s minimal operating and financial risk.