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Discussion Starter · #1 ·
I wonder if this is a real bull market in energy? Or just a war-induced spike in oil prices, perhaps.

When the war started, I bought a small position in HUC which tracks crude oil. It's performing very well but I think XEG is probably the better vehicle, so I switched into XEG.

Looks like a bull market to me:
Rectangle Slope Plot Font Line
 

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There were definitely smart people calling a rotation into commodities last fall long before the war

Premiums on credit default swaps and the rising interests rates were also coming regardless of war

If anything the war was enabled by the west being financially constrained rather than vice verse
 

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I managed to buy into CPG at $2.00/share just after covid started. Unfortunately I only bought 100 shares because I was laid off at the time. Bought another 100 shares at $7.50. Considering buying more. There's only so much oil in the ground, and we are a very long way away from not needing it.
 

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I don't really expend any energy trying to predict bull and bear markets. However some things are arguably "different this time":

All the capital investment that has not been made in recent past years, I think a number something like $300B.

Governments by their words and actions want the death of the industry. These words and actions have helped encourage restraint in the industry, but "oops" the population still wants their standard of living, and unfortunately green alternatives are not sufficient yet to make up for the reductions in the fossil fuel space.

There is widespread understanding that for a great many years, production growth lead to excess supply and rampant capital destruction. Shareholders have said "enough" and want their returns.

Perhaps the OPEC reserve capacity is now more fiction than fact.

The investing public is refusing to value the oil and gas industry as it does other industries. It is a higher return activity to buy back shares instead of growing production.

Other factors not coming to me right now?

So while I don't make predictions, I am in no hurry yet to sell down my considerable oil and gas holdings which have driven a portfolio return of about 260% since year end 2019.
 

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Discussion Starter · #6 ·
I looked at the forward P/E ratios of the top holdings of XEG (majority of the fund). Here are the Forward P/E numbers from Yahoo Finance:

Suncor, 7.37
CNQ, 7.93
Cenovus, 7.69
Tourmaline, 8.73

If we believe their forward guidance, this sector has a forward P/E of about 8 which is about as cheap as it's ever gotten, historically. These are value stocks.

Though, I'm worried that the companies may be using optimistic projections in their guidance. Suncor is assuming $97 WTI for example which doesn't sound like a conservative estimate to me.
 

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I don't really expend any energy trying to predict bull and bear markets. However some things are arguably "different this time":

All the capital investment that has not been made in recent past years, I think a number something like $300B.

Governments by their words and actions want the death of the industry. These words and actions have helped encourage restraint in the industry, but "oops" the population still wants their standard of living, and unfortunately green alternatives are not sufficient yet to make up for the reductions in the fossil fuel space.

There is widespread understanding that for a great many years, production growth lead to excess supply and rampant capital destruction. Shareholders have said "enough" and want their returns.

Perhaps the OPEC reserve capacity is now more fiction than fact.

The investing public is refusing to value the oil and gas industry as it does other industries. It is a higher return activity to buy back shares instead of growing production.

Other factors not coming to me right now?

So while I don't make predictions, I am in no hurry yet to sell down my considerable oil and gas holdings which have driven a portfolio return of about 260% since year end 2019.
And we have the ESG requirements for many large investors. Foreign investment has been selling their investments in the energy sector and it isn't coming back.
 

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My big positions are in ARC Resources, Enerplus, Whitecap ,Tamarack Valley ,Fang ,ConocoPhillips. and Ranger Oil. I look a Crescent Point and compare it to Enerplus and I take Enerplus. CPG assets are in the Bakken zone in SK and Enerplus has a much larger and richer position in the same formation in North Dakota. In addition they have a strong position in the Marcelus shale formation in the US east. I figure the investors have caught on and Enerplus is up about 30% over the past 2 weeks. Fang, Conocco and Ranger oil all have production in the right places in the US. They are low cost producers and they get the full WTI price. Tamarack has a big position in the highly productive Clearwater formation. They are active in expanding production in that area and with much success. I had a large position in CVE but just sold it and put the proceeds into Whitecap and ARC . They are straight producers. Most of the analysts don't see a lot of upside for the integrated companies at this time with the exception of ConocoPhillips. NG producers in the US look like a place with a lot of upside. Historically the summer is the low season for NG and the fall and winter is the strong season. NG is selling close to $9.00 per BTU. Last year it was getting $2.50 a BTU. Things are setting for a very strong bullish market for NG. That is my rational for having my biggest position in ARC Resources. I started buying Range Resources in the US . It is pretty well a straight NG producer.
 

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Finally sold some of my AA ETFs a month ago after they plunged so much. Bought some energy. Made up my loss in less than one month. Watch market facts. Don't hang on to same thing for decades.

Hope I remember to watch the market!
 

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Discussion Starter · #11 ·
Finally sold some of my AA ETFs a month ago after they plunged so much. Bought some energy. Made up my loss in less than one month. Watch market facts. Don't hang on to same thing for decades.
I thought the whole point of the asset allocation ETFs was to hold them for the long term, without trading in & out
 

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Rectangle Slope Plot Line Font


Anyone who thinks oil prices are going to drop below $100 should take a close look at this graph. There is nothing good about it if you are a consumer.

Forward P/E on all oil stocks is ridiculous. For the XEG companies, it is more like a P/E of 4 or less. On a strip basis, it is as low as 3. Yes, that cheap.
 

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If one is timing the market, this might be as good a time as any to buy AA ETFs. There is a suggestion however that markets have another 10% or more to fall. 10 Investing Rules
The 10 rules are:

  1. Markets tend to return to the mean over time.
  2. Excesses in one direction will lead to opposite excess in the other.
  3. There are no new eras.
  4. Exponential rapidly rising or falling markets usually go further than you think but they do not correct by going sideways.
  5. The public buys the most at the top and the least at the bottom.
  6. Fear and greed are stronger than long-term resolve.
  7. Markets are strongest when they are broad and weakest when they narrow to a handful of blue chip names.
  8. Bear markets have three stages: sharp down, reflexive rebound, and a drawn-out fundamental downtrend.
  9. When all the experts and forecasts agree – something else is going to happen.
  10. Bull markets are more fun than bear markets.
In terms of mean reversion, Mr. Suttmeier outlined that the S&P 500 tends to revert to the 200-week moving average during bear markets, which would imply a 14 per cent decline from current levels. He also believes bond yields will return to somewhere near the long-term average, which would be 4.7 per cent for the U.S. 10-year Treasury.
 

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If one is timing the market, this might be as good a time as any to buy AA ETFs. There is a suggestion however that markets have another 10% or more to fall. 10 Investing Rules
That was my thinking. I only have one 2020 discount stock left that I'm letting ride up, the rest went into long term holds with CDN banks & mawer in the past while.

If there is one thing I learned a long time ago is never hindsight trade, as in, who knew XEG was going to $50! ;)
 

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I just did the opposite.
In other words, sell high and buy low. :)
If you make a mistake you have to correct it. I made the mistake of not selling my AAs when they were high and when a drop was generally agreed about to happen. So now I am able to buy other stocks (energy and high divs) when they are increasing. Will watch them and sell when I am happy with my profit. Then possibly (probably?) re-buy AAs when they are lower than they are now.

I totally agree with buy low sell high. But hanging on to AAs as they go up and down does not maximise that.

I am still amazed that some people who responded to my earlier point seemed happy that they did nothing during the 2020 gulf. I was happy with my profits (big profits) and sold a lot in November/December 2019. Then re-bought in mid 2020. Much more profit than doing nothing.

Watch the facts. Don't just slavishly follow an idea based on past results.
 

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So why buy now?
based on 90$ oil most companies pay off all debt by the end of 2022. In 2023 FCF will be at 30%. Companies will be be buying back stock at 50% and the balance in dividends . What happens with higher price oil? what am I missing. Maybe AltaRed can straighten me out
 
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