The Red Hot Energy Sector

I acquired the shares of Encana, Suncor and Precision Drilling six months ago when the TSX Energy Index was in mid 2010 one of the worst performing sectors. At that time the “hot” sectors were Gold, Heath Care and Telecom. There were no investment sheep in the energy complex last summer and so I helped myself to the all-you-can-eat energy buffet. How the energy sector is enjoying a bullish stampede thanks to the crude risk premium due to the uncertain outlook for the larger crude producing Arab states.

I have always believed that when the sheep are hungry you should feed them. Now so far I see no reason to sell all of my energy positions but, I am reducing and moving the proceeds into another sector that the investment sheep are avoiding – the TSX Financial Sector. The sheep are avoiding the obvious crude risk losers like the airlines, transport companies, non-essential retail stores and travel to include fast food, hotels, theme parks and gaming. I think the Canadian Banks are winners either way if the crude risk trade either ON or OFF. Either way I like the Baa, Baa, Banks.