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Oil & Gas

ETFs to ride the Canadian energy sector roller coaster Add to ...

The S&P/TSX Energy index has been on a roller-coaster ride during the past month, up 10 per cent and then down 10 per cent. Where is the sector expected to move from here?

Canadian investors can choose to invest in the sector with a wide variety of ETFs. Each ETF has unique characteristics.

The most actively traded Canadian energy ETF is the iShares S&P/TSX Capped Energy . The Index is based on the performance of 48 Canadian energy stocks that are part of the S&P/TSX Composite index. Largest holdings are Suncor, Canadian Natural Resources, Cenovus, Talisman and Encana. Management Expense Ratio is 0.55 per cent.

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Bank of Montreal offers an interesting twist on the same Index. Its BMO S&P/TSX Equal Weight Oil and Gas ETF is based on a portfolio that holds 14 big cap Canadian energy stocks that are included in the S&P/TSX Capped Energy Index. Each stock is equally weighted or approximately 7.1 percent of the fund when rebalanced. Management Expense Ratio is 0.55 per cent.

Horizons BetaPro offers two leverage ETFs based on the S&P/TSX Capped Energy index. The HBP TSX Capped Energy Index Bull+ ETF seeks investment results equal to 200 per cent of the daily upside performance of the Index. The HBP TSX Capped Energy Bear + ETF seeks investment results equal to 200 per cent of the daily downside performance of the index. Management Expense Ratio is 1.15 per cent.

Investors focusing on equities that respond to the price of oil and gasoline will prefer an "oily" ETF, such as the Claymore Oil Sands ETF . The portfolio consists of 17 stocks. Largest holdings are Suncor, Imperial Oil, Canadian Oil Sands, Cenovus and Athabasca Oil Sands. Management Expense Ratio is 0.65 per cent.

Investors focusing on equities with greater risk and potential return will prefer either the BMO Junior Oil ETF or the BMO Junior Gas ETF . The former consists of a basket of 69 U.S. and Canadian listed junior "oily" stocks that are part of the Dow Jones North American Select Junior Oil Index. The latter consists of a basket of 38 U.S. and Canadian listed junior "gassy" stocks that are part of the Dow Jones North American Select Junior Gas Index. Management Expense Ratio for both funds is 0.55 per cent.

The latest Canadian energy ETF to come to market is the Horizons GMP Junior Oil and Gas ETF . The ETF tracks a basket of 48 small and midcap Canadian energy stocks with a market capitalization between $100- million and $3-billion that are listed on the TMX. Management Expense Ratio is 0.60 percent

The S&P/TSX Energy Index at 353 has an encouraging technical profile despite its recent 10 per cent decline. Intermediate trend is up. The Index recently found support near its 50-day moving average at 339. Short-term momentum indicators are recovering from oversold levels.

Seasonal influences are positive at this time of year. The Energy Index has a history of moving higher from the end of January to the middle of June when the Canadian Association of Petroleum Producers (CAPP) Conference is held in Calgary.

Jon and Don Vialoux are authors of free daily reports on equity markets, sectors, commodities and Exchange Traded Funds. Reports are available at www.timingthemarket.ca and www.equityclock.com . They also are research analysts at JovInvestment Management Inc.

Follow on Twitter: @EquityClock

 
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