Opinions Mike Philbrick
Horizons Cdn Midstream Oil & Gas IndexHOG.TOCOMMENTJul 16, 2021
Mike PhilbrickStock price when the opinion was issued
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Challenge with buying US ETFs that participate in MLPs is that they're not favourable to a Canadian investor. Withholding tax of 15-30%. Be very, very careful on the MLPs. If you want gas exposure, think about XEG or ZEO. Most bang for the buck would be the HED, with small cap exposure. Small caps have more operating leverage if you're confident gas prices will rise. HOG is a bit more conservative.
Mostly pipeline space. He thinks it is a fine holding, trying to equal weight them all. The pipelines are a place of safety. A couple of years ago this one was in a downtrend. It is not without risk. The valuation is not attractive at this point. If oil prices drop, and this ETF drops back, then it is probably a decent thing to own. This is not a great growth holding. It is a yield holding.
If you are going to invest in the energy sector, this would probably be the one sector you would focus in. His view right now is that there are probably some challenges going forward that are not going to play out overnight. If you’re capital is limited, you want to focus on sectors that probably have a tailwind. You probably won’t get hurt too badly with this. He was a big investor in pipelines for 4 years, and it was a tremendous sector. It was very hard to exit last year. Thinks there are better places to focus.
XUT is market cap, ZUT is equal weighted. ZUT gives you more exposure to smaller players. HOG gives you more pipeline and energy services business, which acts similarly to utilities. It also hedges you on the downside. Could be a compliment to the other utility ETFs.