Earlier this morning I started a position in XEG, the iUnits I earlier called a pure shot of Canadian energy. Since it is not yet registered in the U.S., I had to go through my broker's international desk and pay a higher commission. I rationalized that it was cheaper than buying a dozen or so of these names individually, and besides, I didn't know how long before it would be registered and this looked like a good entry point:
stockcharts.com[l,a]daclyiay[dd][pb100!f][vc60][iut]&pref=G
Once it is registered it will automatically convert to the U.S. symbol and I will pay the regular $8 commission.
Like EWC, I plan on holding this for many years. Other reasons for me to buy XEG:
- It gives me instant diversification. Mapping the holdings against Taikun's list in the thread header, XEG gives me companies that are pure plays in production, majors, juniors, technical angles, service companies, and more.
- I don't have the time to thoroughly study and analyze management, earnings reports, quality of reserves, business plans, and properties for all the companies I'm interested in. I just know I need to be in the oil sands.
- I'm not smart enough to predict which companies will be taken over in the next 10 years but I know M&A will benefit most quality companies.
- I'm not smart enough to know which technologies or approaches to cost effectively mine the sands will prevail.
- I know that that the price of oil and nat gas changes dramatically and that fires, accidents, terrorists, embezzlement, and missed earnings happen. The diversity of this fund will dampen those impacts.
- I get a degree of quality. By being included in this index, the company at least has passed a screen by S&P: The S&P/TSX Capped Energy Index is a constrained market capitalization-weighted index that consists of Canadian energy sector companies listed on the Toronto Stock Exchange. Companies are selected for the Index using Standard & Poor's industrial classifications and guidelines for evaluating company capitalization, liquidity and fundamentals.
Finally, it's interesting to me the overlap between some Raymond James picks and the top ten positions in XEG. Every conservative pick is represented, with some aggressive and moderates picks as well. A nice cross representation, I'd say.
Top 16 XEG.TO positions (in reverse order):
UTS ENERGY CORPORATION UTS 1.0106%
ENSIGN ENERGY SERVICES INC. ESI 1.0493%
PENN WEST ENERGY TRUST PWT-U 1.1416%
OPTI CANADA INC. OPC 1.1714%
ENERPLUS RESOURCES FUND ERF-U 1.2096%
WESTERN OIL SANDS INC. WTO 1.7769%
SHELL CANADA LIMITED SHC 2.4832%
CANADIAN OIL SANDS TRUST COS-U 2.5554%
HUSKY ENERGY INC. HSE 3.0968%
IMPERIAL OIL LIMITED IMO 3.9378%
NEXEN INC. NXY 5.5452%
TALISMAN ENERGY INC. TLM 7.8198%
PETRO-CANADA PCA 9.6249%
CANADIAN NATURAL RESOURCES LIMITED CNQ 11.9139%
SUNCOR ENERGY INC. SU 13.9008%
ENCANA CORPORATION ECA 14.4260%
More info, including all positions:
iunits.com
From a December Raymond James report:
We believe that companies operating in the oil sands of Canada continue to be an attractive investment. As a result of oil sands operators having acquired knowledge and developed corresponding world-class expertise in unlocking economic value from the bitumen deposits, we believe the picture only gets better. For example, thanks to experience, many companies now complete greater proportions of planning and engineering work before commencing construction thus mitigating the potential for capital cost overruns. In addition, the entrance of foreign oil companies (especially from China) provides further evidence of the extent to which the oil sands resource base is considered both economically strategic and politically desirable. With essentially all of the land in and around the oil sands now leased, any company (or country) that wishes to gain access to the resource will be forced to step up and pay top dollar.
Aggressive Strategy
For those who want to gain the most from the higher oil price environment, we recommend positions in:
• Canadian Natural Resources Limited
• Canadian Oil Sands Trust
• Deer Creek Energy Limited
• OPTI Canada Inc.
• UTS Energy Inc.
Moderately Aggressive Strategy
For those who want good upside, but with less risk than the aggressive strategy implies, we recommend positions in:
• Canadian Natural Resources Limited
• Canadian Oil Sands Trust
• EnCana Corporation
• Nexen Inc.
• Suncor Energy Inc.
• Western Oil Sands Inc.
Conservative Strategy
For those with less tolerance to risk, we recommend positions in:
• Husky Energy
• Imperial Oil Limited
• Petro-Canada
• Shell Canada Limited
• Suncor Energy Inc. |
