The analysis and amount of diligence taken by investors in picking individual stocks for long-term holdings ought to include a few factors. In addition to fundamental analysis of a given company’s valuation and operational metrics such as margins, predicting how the broader sector a company operates in will perform over the long-term is key to having an idea of how a given company will perform, over time.
The oil and gas sector, particularly in Canada, has been hit extremely hard in recent months. This is due mainly to tensions between the Organization of the Petroleum Exporting Countries and Russia on the supply side and coronavirus on the demand side. While both issues seem short term in nature on the surface, when one considers the long-term trend from electrification and sustainability, we see the secular tailwinds for this sector are likely, as we transition many parts of our economy away from fossil fuels towards sustainable alternatives.
Focusing on sectors that have strong positive tailwinds supporting the long-term success is key in picking individual stocks. Investors ought to consider not only their own investing preferences but also the preferences of the broader market before making a unilateral investing decision. Capital inflows and outflows from institutional investors often play a much bigger role in the performance of a stock than investors think. Be sure to keep this in mind.
Invest wisely, my friends.
