$XLE $XEG (TSX) $MLPX
$XOM $PBR $EQNR $TTE $IPCO (TSX), the larger ones
$RIG $BORR, the drillers
Some of you know we’ve been heavily invested in oil and gas, for a few years now, with a full position since Q3 of 2025. It’s been a great run. We’re still holding, and hedging when things get extended.
But this series starts from zero. The idea is to build a compounder portfolio from scratch, together, so we’ll treat it as if we had no position at all. Every entry will go into a real model account, for you to see.
Entries will be gradual. And of course, the best place to buy is low, that’s no mystery, ideally when things are cheap and hated. Otherwise, we like to enter at least when things are not overbought, which is most of the time.
So, where are we?
Nothing is cheap out there right now, not really. With rates where they are, and where they may be heading, the free cash flow yield on offer from most companies is poor, to say the least.
Energy is one of the last places left with good dividends, and often good buybacks. Upstream, midstream, downstream and services. Not as cheap as at the beginning of the year, but then again, oil is way higher now. In that regard valuations remain fair, and there’s certainly no euphoria in the sector.
Which leaves one real question. Will oil prices stay elevated? In other words, the cycle. Because if it weren’t for the frequent downtrends, energy companies would be outstanding compounders.
So the question becomes, can we hedge those downtrends?
This is where our approach comes in. Fundamental analysis gives us the conviction to buy and hold, and tells us when things get extended. Trend analysis drives the hedging, especially in the short term.
And the tool is options. They’re a big part of the market now. Many use them to gamble. Others speculate with more structured, smarter systems. And some use them to hedge the downturns, generate income, and smooth the equity curve, in trading and investing alike.
We lean towards the latter two of course.
So, can energy companies, hedged with options, become a great part of a compounder portfolio? We think they can, been doing that for a very long time.
And we’ll show you. A real model account, every entry and every hedge, so you can see exactly what we’re doing.
