This post is for future reference.
In general, the status of Canadian oil and gas (no doubt due to ESG investors, coupled with our federal administration) has suppressed asset prices to the point that is reminding me of how Philip Morris was trading in 1999-2000 (single digit free cash flow multiples). Needless to say, I think we are in the early stages of a mean reversion process.
I introduce Divestor’s Canadian Oil and Gas Index (DCOGI), which covers a good swash of upstream production, and some downstream as well. It is a pretty simple index which covers most of the Canadian oil and gas production, and some downstream refining –
20% of: CVE, CNQ, SU
10% of: TOU, WCP
5% of: ARX, BIR, MEG, PEY
I will set the index at 100, and construct it off of a notional index of $1M invested at the prices closing February 5, 2021. No rebalancing. Dividends/distributions will NOT be reinvested but cash drag will be tracked. I’ll post more details of the index composition this weekend and track it periodically.
(Update, December 14, 2021 – I have posted a Re-Balancing Policy)
Update at the end of the trading day:
Ticker – Shares:
ARX – 7,426
BIR – 20,325
CNQ – 6,196
CVE – 24,600
MEG – 8,993
PEY – 10,482
SU – 9,066
TOU – 4,662
WCP – 19,048
You should track vs XEG.
Can you explain the idea of the cash drag? It appears that you will accumulating the dividends in the basket. Won’t this will desensitize the index to share price movements over time?
The Divestor index rulings subcommittee (of which, given your interest, I’ve signed you up as a member) will make a ruling at some point in the future determine the outcome of this cash accumulation.
My initial aversion is that I generally do not believe in dividend reinvestment strategies. If/when the cash starts to become a material part of the index it’ll have to rebalanced somewhow.
Glad to be on the committee haha. Why not express the cash as yield on a current (or forward) basis and as an annualized to-date basis too. This keeps index pricing separate from cash distribution as per individual common stocks.
already holding 6 of the stocks will likely add more – once we & Europe finally get a viable covid vaccination strategy we could see a good market in second half of 2021. Sad that in spite of Trump’s lack of direction the US is now way ahead of us in vaccinations. (11.8 vs 2.8 per 100 as of Feb 6)
ARX and VII merger announced today, VII holders will receive 1.108 shares of ARX (approximately at-the-market) and will own 51% of the combined entity.
I’m pretty tepid on the acquisition. This is nothing like what WCP or CVE did, where the strategic returns are significant. Same thing for BIR and their Gordondale acquisition from Encana.