iShares S&P TSX Capped Energy Index ETF caught a lift with oil prices

Apr 27th, 2016 – Comment

Has had a great 2016


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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iShares_by_BlackRock Hi Lou,

1- I am looking to add energy to my portfolio. I have been looking at XEG, ZEO and ZJO energy ETF’s that follow an index. All 3 have a yield of about 4%. Looking to invest for about 2-3 years as energy is at a low still. Which one would you recommend and why.

2 – I have read your article “Risk seekers should eye Noranda Income Fund”. The yield is 17% and was wondering how risky this stock is. Would you invest in it? I wonder when in 2017 the contract with Glencore ends in order to invest past Jan 2017. Thanks, Paul

 

Hey Paul,

I am going to take a look at the energy ETF’s starting with iShares S&P TSX Capped Energy ETF (XEG TSX). A study of Noranda Income Fund (NIF.UN TSX) will have to wait as I serve other investors. I will get to it when I clear the backlog of requests.

The top holdings of the fund are Suncor Energy Inc. (SU TSX)  25.95%, Canadian Natural Resources Ltd. (CNQ TSX) 20.47%, and Cenovus Energy Inc.(CVE TSX) 7.49%. The assets are concentrated in two segments of the energy complex. Oil and gas exploration and production accounts for 53.17% of the portfolio and integrated oil and gas 41.92%.

A probe of the charts will begin the comparative analysis of the ETF’s you are considering. In terms of a two to three year investment horizon I will not be able to help. Two or three weeks is a lifetime in the current environment. What I can provide is a snapshot and the advice that you monitor your position relentlessly.

 

 

 

XEG

 

The three-year chart depicts the long decline in the value of the units that started in June of 2014 as the price of crude oil sideswiped all the participants in the industry. What is also evident is that after hitting a 52-week low of a $7.98 in January of 2016 the stock started a new leg up. The advance has taken XEG up and through the downtrend line as well as the 50 and 200-day moving averages.

Make note of the resistance that has come in near $12.00

 

 

 

 

 

XEG2

The six-month chart pulls into focus the buy signals generated by the MACD and the RSI that formed in January as the units moved off the 52-week low. What is also apparent is that we are on the cusp of a golden cross but are not quite there yet.

At this point a would expect a slight pullback but not a trend reversal. The yield on distributions is currently 2.81%.

 

 

 

 

 

 

 

Next time I will inspect the charts for the BMO S&P TSX Equal Weight Oil & Gas Index ETF (ZEO TSX).

Make it a profitable day and happy capitalism.

Categories: Energy
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