Source: Getty Images
“Buy low and sell high” is perhaps the most popular adage when it comes to making money in the stock market. In practice, it sounds simple. Many investors are aware that it is difficult to invest in a market that is falling.
In bear markets like we’re in now, the temptation can be to cut losses. Whether it’s for tax purposes, or simply avoiding additional losses, when investors can’t see the bottom, it’s generally the time many sit out the volatility. However, many studies have shown that missing out on the best “up” days in the market can hurt one’s returns over time. Therefore, it is important to stay invested, even when markets are turbulent.
If you are looking for something to purchase at a lower price, I believe this is the place. Cenovus Energie It’s worth looking at (TSX-CVE) (NYSE:CVE). Let’s dive into why this may be a great example of a company worth adding to ride out this volatile period of time.
Commodities are still a safe place to hide
Cenovus is one the most prominent players in Canada’s oil sands. Accordingly, oil prices tend to impact this company’s valuation more than others.
Cenovus has increased its capacity over the years. Many thought it was the worst. The crude oil price temporarily plunged during the pandemic. This was devastating for oil producers. Cenovus, which has a large amount of debt and this stock fell below $2 per shares because of concerns over possible bankruptcy.
Long-term investors who believed energy prices would eventually decline have been proved right, with shares now trading at $17 each. Cenovus, which is now trading at more than $17 per share, is a major beneficiary of the tailwinds that this sector has been experiencing.
Commodities were a safe haven during the volatility. I believe that many of the tailwinds driving this sector higher are likely going to continue. Cenovus stock has more room for growth, especially when it trades at around $16. 23 times earnings.
A falling market could bring more downside
Cenovus is one of the commodities stocks that has been under pressure. Crude oil prices fluctuate and are still higher year-over-year. However, compared to the peak we saw earlier this year, we’re now in a declining price environment.
Investors are concerned about the possibility of a global recession. Nothing is safe in such an environment. Cenovus and other energy-dependent companies may do worse than their peers until we end using energy. That’s the thesis with investing in more defensive names for those concerned about what the future has in store.
Buying stocks in a falling market isn’t easy. But for those looking for outsized gains over the long term, that’s exactly the strategy that makes sense. Cenovus investors who took a chance on the stock during the pandemic were well-rewarded. If we’re due for another selloff like what we saw two years ago, I suspect the same will be in order for investors.