Brooke ThackrayHorizons S&P/TSX Capped Energy IndexHXE.TOPAST TOP PICKApr 25, 2017

(A Top Pick Aug 15/22, Up 8%)

Believes energy prices will remain strong.
Will continue to own shares.
Expecting higher returns for energy sector going forward.
Expect volatility.

oil There's underproduction of oil and supply constraints. Also, US oil reserves were drained before their elections and now needs to be filled whenever oil dips to $70. So, oil has a floor and there remains demand. A good sector to own, especially if China opens next spring. XEG holds Canadian oil stocks, and is market-cap weighted, including CNQ, Suncor and Cenovus among its top holding. ZEO is an equal-weight, so offers a little more diversity. And HXE is the cap-weighted ETF like XEG, but it doesn't pay a dividend. So this is good outside an RRSP. For midcap oil, look at NNRG, but charges a higher MER. It depends on your tax preference and the contents of each ETF.

It is a capped fund and a play on energy which faces a bumpy road. The longer term secular has a positive skew to energy stocks. Because of ESG and the environmental concerns we have under-invested in the production and development of oil and gas and therefore there is a tightness in the supply chain. Start to pick at them, take your time and be patient. Use cyclical draw-downs to build and maintain portfolio positions.

Energy ETF Commodities are sensitive to the cycle: warning. Suggests XEG or HXE, both market-cap weighted in oil producers, but they are dominated by Suncor and CNQ (over 50% of these ETFs). For more diversification, look at equal-weighted ZEO-T. But he prefers HUC-T because it gives you commodity--and not commodity stock--exposure. For all of these, be very, very careful--there could be severe drawdowns in energy if the economy falters in the next 12 months.

Use caution since stifling inflation will stifle growth and therefore put pressure on commodities. ZEO is a BMO ETF with equal weight in more companies. He prefers commodity exposure instead of commodity stock exposure but still be cautious with something like HUC.

(A Top Pick Jan 07/20, Down 10%) The seasonal period actually starts now. The energy sector has been killed again. It is showing some stability now. This downturn is the Corona virus. The lows are all getting higher.

It's capped but a total return index, covering energy. We're on the cusp of oil seasonality, and oil has been doing well since October. That said, oil is way off the highs from 18 months ago. We're seeing higher lows on the HXE chart, which is good. Feb. 25-May 9 is oil seasonality. Geopolitical tensions may help HXE and oil, but still have a ways to go.