This Energy ETF is Being Throttled: Should You Buy Low?

Canadian energy stocks have been routed in the final days of July. Oil entered a bear market in early June and gas prices have also suffered in the summer so far.

Investors are anxious in anticipation of a potential rate cut, which has come into play in the face of slowing growth and rising trade tensions between the United States and China.

This latter factor has driven turbulence in the energy sector. A prolonged trade war is expected to cut into global oil demand. The U.S. and China agreed to a “trade truce” at the G20, but a concrete long-term agreement still looks remote.

The Horizons S&P/TSX Capped Energy ETF (TSX:HXE) was down 0.71% in mid-afternoon trading on July 30. The ETF fell by 26% in 2018 and has not started well this year. It is down 4% in 2019 as we look ahead to August.

Since its inception, the fund has only managed one year in the black – 2016. Is there any reason to believe this will change before this year is through?

Some of the top holdings in this ETF include Canadian Natural Resources (TSX:CNQ), Suncor Energy (TSX:SU), and Cenovus Energy (TSX:CVE).

Many of these holdings are undervalued due to the bear market, but I’d rather own stocks like Suncor outright than in this bundle. The energy sector is fraught with uncertainty, and I want the additional income if I’m going to take the gamble in my portfolio.