Accordingly, earlier this year I took a humble flyer about Nuttall’s NinePoint Energy ETF (NNRG / Neo-Börse). His focus is on mid-cap Canadian energy stocks, although US energy stocks have a low weight of 7.8%. The top 10 holding list includes well-known names like Suncor and Cenovus, but also lesser-known names like Hardwater Exploration and Nuvista Energy Ltd.
So far, the fund has performed very well. In an article in the Financial Post, he noted that the action will increasingly shift to the larger well-known large capitalization energy stocks as common and institutional investors get into the topic. In late October, when skeptics began to wonder if the price of oil had reached nearly $ 80 a barrel, Nuttall was still insisting that “the oil party has only just begun”.
Roberts, who also blogs on cutthecrapinvesting.com, has this to say about Nuttall’s thesis: “I buy Eric’s argument, he puts the math out on a regular basis … producers are better positioned than many of the US players. Nuttall finds more free cash flow torque in the mid caps. “
Ardrey says that unless you are experienced in stock picking, using an ETF is the better way to go. “This gives you a commitment to the industry and at the same time reduces the company-specific risk. In addition, you need to consider how much exposure you want to get in a single sector and how the risk of a more cyclical sector fits into your profile as part of your overall mix of assets. ”
It makes sense to use someone like Nuttall to pick out unfamiliar small or mid-cap stocks. For larger cap Canadian energy stocks, you could take the ETF route or do what Roberts often does and pick a few names from the ETFs.
One such ETF that I bought earlier this year was ZEO from BMO, an equally weighted ETF that only holds about 10 Canadian names. With the same weighting, its positions in natural gas are higher than would be the case with a market-weighted equivalent fund. Compare the holdings of ZEO and XEG and the same weighting is the main difference. Thus, Suncorp accounts for 24% of XEG compared to only 10.55% of ZEO; Similarly, Canadian Natural Resources accounts for 23.4% of XEG but only 10% of ZEO.
Like NNRG, ZEO did well in 2021. This led me to consider which international and US ETFs could complete the picture outside of Canada. Ardrey warns: When investing in non-Canadian securities, you must also consider the impact of currency.
“A weaker US dollar against the Canadian dollar will reduce returns and a strengthening one will increase returns. This is just an additional consideration for investors if they want to diversify beyond our borders into the energy space. “