We recently published a list of 12 High Growth Large Cap Stocks to Buy Now. In this article, we are going to take a look at where Cenovus Energy Inc. (NYSE:CVE) stands against other high growth large cap stocks.
BlackRock highlighted that its portfolio managers are broadly optimistic about US equities. Its portfolio managers opine that there is still some expected upside potential, despite the steep US stock valuations. However, the contrast between lagging European economic growth, and stock performance, is stark. The US Fed decided to reduce the policy rate by another 25 bps in a recent meeting as the apex bank sees inflation moving closer to its target of 2%.
However, the financial conditions remain loose after a historically sharp tightening cycle. The firm believes that such an unusual backdrop strengthens its view that the environment is being dominated by structural forces and not by a typical business cycle.
Overall, the firm remains overweight on the US given the positive view on the AI theme. The valuations for AI beneficiaries have strong backing as technology companies continue to beat high earnings projections. The asset manager believes that falling inflation continues to ease pressure on corporate profit margins.
High-Single Digit Growth in S&P 500
Goldman Sachs Research’s projections for the S&P 500 Index of stocks remain broadly the same as it was before Trump’s win. As per David Kostin, the chief US equity strategist at the firm, the S&P 500 is expected to reach 6,300 in the upcoming 12 months. The researchers expect growth in EPS of 11% in 2025 and 7% in the following year. That being said, David Kostin highlighted that the estimates might change as and when the new administration’s policy agenda gets revealed. Overall, strong earnings growth is expected to fuel continued equity market appreciation into next year.
Historically, the S&P 500 index generated a median return of 4% between election day in November and calendar year-end, as per Goldman Sachs. Together with the resilience in broader economic growth data and the expectation for further rate cuts, the near-term outlook for US equities remains healthy, as per Kostin.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
US Tariffs’ Impact
Several investors remain focused on trade policy, and Mr. Trump might have plans to implement some of the tariffs without legislation. Goldman Sachs believes that Trump will impose tariffs on imports from China. These are expected to average an additional 20 percentage points. Furthermore, European companies can face tariffs. The large investment bank also highlighted that, during Trump’s previous administration, domestic-facing and defensive industries, including utilities, telecom services, and real estate, outperformed. On the other hand, the stocks of automobiles, capital goods, and technology hardware underperformed.
The company believes that M&As might increase under Trump’s presidency. Though the policy uncertainty will take time to recede, there are expectations that antitrust regulation will be more relaxed. Moreover, the continued economic expansion and higher confidence among CEOs might result in increased corporate combinations. Approximately, $4 trillion of corporate spending in the next calendar year might roughly get evenly split between returning cash to shareholders and growth investments (such as CapEx, R&D, and M&A).
A portfolio manager studying various stocks and other securities on a tablet.
Our Methodology
To list the 12 High Growth Large Cap Stocks to Buy Now, we sifted through several online rankings and a screener. We extracted the stocks that have a healthy 5-year revenue growth and a market cap of more than $10 billion. Finally, the stocks were ranked in ascending order of upside potential, as of 12th November.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Cenovus Energy Inc. (NYSE:CVE)
5-Year Revenue Growth: ~35.4%
Average Upside Potential: ~37.9%
Market cap as of 12 November: $29.2 billion
Cenovus Energy Inc. (NYSE:CVE) is engaged in developing, producing, refining, transporting, and marketing crude oil, natural gas, and refined petroleum products in Canada and internationally.
Cenovus Energy Inc. (NYSE:CVE)’s flagship Christina Lake Steam Assisted Gravity Drainage (SAGD) facilities continue to serve as the cornerstone of its upstream business. Wall Street experts opine that the company’s upstream operations, mainly its oil sands assets, have been a source of strength. In the Oil Sands segment, Cenovus Energy Inc. (NYSE:CVE) is progressing with the tie-back of Narrows Lake, building a 17-kilometre pipeline connecting the reservoir to the Christina Lake processing facility, which is expected to add between 20,000 bbls/d and 30,000 bbls/d of production.
The company highlighted that the project is ~93% constructed. The critical tie-ins to the Narrows Lake pipeline were completed during the Christina Lake turnaround. Notably, the project is on track for its first production in mid-2025. The company remains optimistic about its strategic initiatives, which form a base for long-term growth. At Sunrise, as part of the growth program, Cenovus Energy Inc. (NYSE:CVE) brought 2 new well pads online in Q3 2024, which will continue to ramp up into the next quarter. Also, one additional well pad is expected to come online in early 2025.
Cenovus Energy Inc. (NYSE:CVE)’s healthy portfolio of long-life, low-decline oil sands assets and positive leverage to improving commodity prices should act as growth drivers. Its low steam-to-oil ratio and cost-reduction initiatives resulted in some of the most efficient SAGD operations among industry peers. This efficiency equates to lower production costs and a lower carbon footprint, placing Cenovus Energy Inc. (NYSE:CVE) well in terms of both profitability and environmental sustainability.
As per Wall Street analysts, the shares of Cenovus Energy Inc. (NYSE:CVE) have an average target price of $22.13. L1 Capital, an investment management firm, released its Q1 2024 investor letter. Here is what the fund said:
“Cenovus Energy Inc. (NYSE:CVE) (Long +20%) shares performed strongly as the WTI oil price increased 16% to ~US$83/bbl, while refining margins in the U.S. Midwest improved dramatically from a low base. During March, Cenovus’s 2024 investor day was well received, where its 5-year outlook for the business included growth in upstream production of around 150m bbl/d above the current 800m bbl/d and a material turnaround of its downstream refining business. Over the next five years, the company expects to generate C$32b of cumulative free cash flow based on a US$75/bbl WTI oil price, a highly attractive prospect given its current market cap of ~C$51b. Furthermore, it has committed to return 100% of excess cash flow back to investors once it reaches its C$4b net debt target (expected in 2024). Cenovus’s strong cash flow generation, combined with the long-life nature of its oil sands assets and its low cost of production, make it one of our preferred Energy exposures.”
Overall, CVE ranks 6th on our list of 12 High Growth Large Cap Stocks to Buy Now. While we acknowledge the potential of CVE as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than CVE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
