Is The Canadian Energy Sector The New Safe Haven Asset?

by: Jonathan Yates

Rounds of quantitative easing have resulted in great losses for traditional safe haven assets such as gold and silver.

For 2013, the exchange traded fund for gold, SPDR Gold Shares (NYSEARCA:GLD), is down more than 18%. Over the same period, the exchange traded fund for silver, iShares Silver Trust (NYSEARCA:SLV), has fallen by more than 24%. What has risen in value are stocks in the Canadian energy sector such as Suncor Energy (NYSE:SU), up almost 20% for the last quarter of market action; and Octagon 88 (OTCPK:OCTX), soaring over the last month due to a favorable report on its holdings in the oil-rich Alberta Province of Canada.

In a recent article in The Wall Street Journal, it was reported that Repsol (OTCQX:REPYY), the Spanish oil giant, is looking to spend $5 to $10 billion to acquire assets in North America. Repsol is looking to spend billions as it wants a more secure base of energy and natural gas properties. According to The Wall Street Journal article by Christopher Bjork, ""Repsol Hunts for Oil-Firm Acquisition in North America," the Madrid based entity, "...seeks to increase its investment in politically stable countries..."

While Repsol is looking in both the United States and Canada, north of the border presents the most welcoming and secure investment in the energy sector. Canada welcomes foreign investment in its energy industry. A sparsely populated country, Ottawa realizes that foreign capital and other resources are needed to fully develop the energy sector of Canada.

As an example, China's CNOOC (NYSE:CEO) was able to buy Nexen (NXY), a Canadian oil firm earlier this year. By contrast, CNOOC was beaten back when it tried to acquire Unocal, an oil and natural gas company that was based in California. Unocal was later acquired by Chevron, (NYSE:CVX), also headquartered in California. Octagon 88 is based in Switzerland.

There is also a wide range of choices in the Canadian oil sector, from prominent blue chips to promising small caps.

Suncor Energy is "Big Oil" that counts Warren Buffett as a major shareholder. Americas Petrogas (OTCPK:APEOF), a small cap entity based in Calgary like Suncor, recently announced second quarter earnings with substantial gains in net revenue and sales volume. Canadian Natural Resources Limited (NYSE:CNQ) is another oil and gas firm headquartered in Calgary with sales of more than $14 billion that is up almost 10% for the last quarter.

While gold and silver have fallen, oil has increased in price despite low demand and high inventories. To a large degree, oil has replaced gold and silver as a safe haven asset. The world market for oil is deeper with far greater liquidity. It also presents a much wider array of investment vehicles. There is also an industrial demand for oil, of which there is virtually none for gold.

Repsol is clearly demonstrating that the most secure oil and natural gas assets are in North America. Canada presents a much more stable base than the United States: the Keystone Pipeline project evinces that to investors. "The War on Coal" by The Obama Administration is even further proof. For safe haven investing, the Canadian energy sector is very compelling for buyers around the world.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in OTCPK:OCTX over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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