Even I'm shocked at how bad the recent plunge in Canadian energy stocks has been.
The nasty details hit home for this experience financial writer when I recently checked an account I manage with some shares of the iShares S&P/TSX Capped Energy Index ETF (XEG-T) in it. The shares were bought Feb. 10, 2009, at a price of $13.84, which by chance was near the low XEG reached during the 2008-09 stock market crash. Flash ahead to this week and the shares were trading at $11.26.
This is how bad energy shares have been: While the global financial system is in vastly better condition than it was back in 2009, energy is in worse shape. Let this be a lesson to you, brave investors who are tempted to buy commodity stocks at today's bargain prices. It can always get worse.
That February 2009 XEG purchase looked great for a while. The shares hit the $18-$19 range by the end of 2009 and then topped $22 in early 2011. There price then headed lower, but was back above $20 in summer 2014. The bottom fell out of oil prices after that, and XEG followed along. There was a rally to around $15 in April, but it collapsed. XEG does pay dividends, but even here things have gone awry. From 40.6 cents per share in 2009, the total payout has fallen to 36 cents. The story here is that tough times in the oil patch have led to dividend cuts.
I'll stick with those XEG shares because of the example of 2009. When energy turns around, it can take off like a rocket. But if I had it all to do over, I'd sell the shares to lock in a decent gain. Think about doing likewise if you're buying XEG or any other commodity play this summer. A bull market for commodities needs a strong global economy and we're far from that right now.