Stockchase Opinions

Javed Mirza iShares S&P/TSX Capped Energy Index ETF XEG-T SELL Mar 09, 2023

Big runup, and then a sideways consolidation. Easy money's been made in energy. Oil likely to move lower and be in a sideways, choppy trading range. For the bulk of this year, and into 2024, energy stocks will go sideways and be relative underperformers. For example, if market's up 10%, energy might be up 8-9%. So they'll be broadly in line with market, but will underperform. They're late-cycle plays, and all his works shows that we're starting a new cycle.

$16.020

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BUY
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.
BUY ON WEAKNESS

Best way to get exposure to Canadian energy.
Provides dividends.
Excellent returns. 

HOLD

Total return over 3 years is 157%. Total return should be your focus, unless you really need the income. There's value in energy going forward, but no near-term catalyst for it to move higher anytime soon.

BUY
Good resource sector ETF?

It's such a broad sector, from energy to oil-related to materials to gold or uranium.

The most popular one related to the energy index is probably XEG. Exposure to most of the larger Canadian energy producers like CNQ, SU, etc.

What's catching his eye more right now is CGL, the gold bullion ETF. Recently broken out. He can see a scenario where gold moves higher to $2600 or even $3000 over the next year and a bit. Avoids the issues that come with mining in certain jurisdictions. Good way to play exposure to gold and to the commodity market in general.

BUY

Bullish on energy. Breakout on many oil and gas equities. Still lots of opportunity in sector. Investors not overly interested in sector. 

SELL

There are funds that have materially beaten this one. Most of the planet owns CNQ, and it's the top holding of this fund. SU is second. Those names have done really well, but there's now more upside in other names. More potential in mid-cap names.

BUY

The go-to energy ETF. He's bullish energy, particularly Canadian. Is market-cap weighted, so you get more exposure to big names like Suncor and less to smaller names.

WATCH

In general, the energy sector is one that could start to move positively simply because he thinks there's going to be a change in Canadian government. It might be the place to be.

COMMENT

The cap is pretty high. He doesn't know if there are more equal weight ETF's in the energy sector