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Buy, Sell or Hold: Suncor Energy (SU)

Today's Financial News - Posted September 29, 2008

After making a great call on Chevron (CVX) earlier this year, Horacio Marquez is moving to oil sands operators. Is Suncor Energy (SU) a buy at current levels? Or should you ignore it until production is up?

by Horacio Marquez, Money Morning

Baltimore — (TFN):  On July 21, when oil was trading at some $125 a barrel and in an apparent freefall, I issued a scaled “Buy” on Chevron Corp. (NYSE: CVX).

I based this call on the stock’s ultra-low valuation and the company’s business model, which would enable it to keep posting strong profits even at lower margins. Despite the huge market sell-off – and a whipsaw market for oil that saw prices fall to as low as $90 a barrel before rebounding recently – Chevron’s stock has outperformed both the broader stock market and its oil-sector peers. At Friday’s closing price of $86.95, Chevron’s shares already are up 2.0% from that July 23 recommendation.

With the much-needed opening of offshore drilling in the continental United States, Chevron is positioned uniquely to thrive – as are its shareholders. As I noted back in July, it wasn’t “a question of if, but when” to invest in Chevron.

I bring this analysis to your attention in light of a reader’s question about Suncor Energy Inc. (NYSE: SU), where similar investment logic applies, despite major differences in the companies and in the risk-reward equations of their shares.

Suncor Energy has risen as high as $74.28 earlier this year, before falling to its three-year strong-resistance level of about $39 a share recently (the shares closed Friday at $45.37, down $1.82, or 3.86%, each). Read on to learn more.

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