The Canadian energy sector has bounced back nicely in 2019 after a rollercoaster year in 2018. Stocks built momentum in the spring and summer of 2018 before plunging oil and gas prices brought the sector back down to earth.
The BMO S&P TSX Equal Weight Oil and Gas ETF (TSX:ZEO) has shot up 12.9% in 2019 as of close on February 21. This is after a 25.6% drop in 2018. Some of the top holdings in the fund include TransCanada Corporation, Husky Energy, Suncor Energy, and Enbridge. The ETF has been one a two-year losing streak, posting double-digit percentage losses in 2017 and 2018.
This month Warren Buffett’s Berkshire Hathaway announced that it had taken a fresh stake in Suncor Energy. At the very least this move should inspire confidence in the Canadian energy sector after a few years of floundering.
The Alberta oil patch entered crisis mode in late 2018 before Premier Rachel Notley announced production cuts that stabilized the price differential between West Texas Intermediate and Western Canadian Select.
The move from Buffett may suggest that foreign capital is starting to find the oil patch more attractive to start 2019. Alberta is set for an election this year, and the oil-and gas-friendly United Conservative Party is way ahead in the polls. Investors should expect a transfer of power.
The BMO Equal Weight Oil and Gas ETF is a tad pricey as of this writing, but the sector still has some legs after the early rally.
