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Don VialouxiShares S&P/TSX Capped Energy Index ETFXEG.TOWATCHJul 11, 2014

Energy stocks in Canada typically do very well from October right through until around May. The index and the units have rolled over in the last little while, and have gone below the 20 day moving average. Good news is that the next period of seasonal strength for Canadian energy starts right around the last week in July and goes through until October. Technicals are not positive yet, so watch for them to start normalizing.

Don Vialoux

Unknown

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$20.16

Stock price when the opinion was issued

$24.59

As of Jun 19, 2026. Market Open.

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BUY ON WEAKNESS

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

SELL

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.

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.

PAST TOP PICK

(A Top Pick Mar 21/22, Up 8%) Energy sector is not favourable at this time. Longer term, it will do well. Right now, wait for a better opportunity, perhaps late, late December/early January or in February.

BUY ON WEAKNESS

Long term is negative on outlook on for traditional energy (~20 years). Short term, is buying energy names (~5 years). Doesn't think oil will go to $120. Once conflict in Ukraine stops, oil prices will fall.

DON'T BUY

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 6-12 months.

TOP PICK

This is for exposure to the Canadian energy sector which is in a better spot than the U.S. sector. Energy has done really well and has more to go, being in a strong seasonal period. April is a very good month for energy.

SELL ON STRENGTH

The way to trade energy is XEG which is market cap weighted. ZEO is equal weights. He has been selling into strength right now though.

PAST TOP PICK

(A Top Pick Feb 11/20, Up 57%) He had it as a tactical play, which he holds for 3-6 months, not a core position. Once he makes his 20-25%, he's out and doesn't pay attention to what happens after that.

SELL ON STRENGTH

Not early in this play. Oil prices are getting back to the $100 area, but energy stocks won't get back to levels at the time due to the ESG factor. Because of the under-investment in traditional energy stocks, prices may stay elevated. However, it will probably see lower highs per rally. Trimming exposure to energy. Would not add new money and would trim.

COMMENT

Average adviser clients would have 5-20% allocation in energy. It is cyclical and volatile. It could go down. Wouldn't recommend holding more than 20% weighting in the sector. Current energy weighting on the TSX is 12%.

COMMENT

Okay if you are interested in dividends. If you are looking for capital appreciations, there are better choices for this. 2.8% dividend.

BUY

The world is moving away from oil, but in the short term, there could be increased demand to supply. If oil is $60-$80, oil stocks are pretty cheap. Likes the sector to trade, but not for the long term. The biggest investors in green energy are these traditional energy companies.

COMMENT

XEG widely diverges from the price of oil. Why? The large caps take more time to come back. There's mass selling in Suncor, rumoured to be the Saudis, but this should be over. He expects SU to rally. Divestments and general confusion about peak demand impacts fund flows into large caps. It's faster to make the small-caps rally because they need less money. It's very difficult to find mass supply of shares of small caps.

COMMENT

Both the US and Canada governments are now less supportive of the energy sector overall. However, because of cut-back in capital expenditure, the reflation story is positive for the next year. Crude oil prices can climb to $50-$60. Ultimately, this will not be sustainable but you could be over-weight for the next 6-12 months.

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Don VialouxiShares S&P/TSX Capped Energy Index ETFXEG.TOWATCHJul 11, 2014

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