Michel Massaad, 35
Index funds in his registered retirement savings plan; oil and gas stocks in his non-registered account (including Palliser Oil & Gas Corp. , TriOil Resources Ltd. , Eagle Energy Trust Unit and Hyperion Exploration Corp. )
“I like my RRSP investments dull and boring,” says Michel Massaad. “They are needed to support me in my retirement years, so I don’t want to take big risks with them. Passive tracking of market returns is fine with me.”
As for non-registered funds, it’s a different story. Mr. Massaad follows an active investing approach that is overweight in the shares of Canadian oil and gas companies. “I believe oil consumption is on the path of growth for the next decade and I intend to take every advantage possible of it,” he explains.
Bullish prospects for oil and gas sector
“Economic growth is accelerating all over the world, particularly in Asia and Latin America,” writes Mr. Massaad on his blog at beatingtheindex.com. “A new middle class is emerging and is looking to reach the same standard of living we enjoy in the West.”
“Oil is the one commodity absolutely essential to their economic growth,” he adds. “They need oil to drive trucks, cars, planes and ships … and run factories, machines and power plants so necessary to a modern industrial economy ….”
But oil supplies are getting harder to reach and costlier to produce. This scarcity factor means oil prices should remain strong in the years ahead.
Sector focus facilitates active investing
Active investing requires a lot of time and effort. Mr. Massaad finds the process is less onerous if he concentrates on one sector with good prospects. And he feels he can make better picks since he can acquire a deeper expertise in the kind of stocks he buys and sells.
What he looks for in an oil and gas company
He looks at several company variables, including management’s track record, how much money they have invested in the company, how extensive land holdings are in an oil-rich region, and a focus on exploitation, not exploration. He prefers Canadian companies because he doesn’t have to worry about currency risk or political instability.
“Spartan Exploration, which returned more than 100 per cent.”
“It was not taking a tax loss earlier on Perpetual Energy, which went down a lot because of heavy exposure to tumbling natural gas prices. And then it cut its dividend.”
“Keep your expectations realistic.”
Special to The Globe and Mail
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