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SP500, Nasdaq, XEG.TO

Cyclicals outperform tech

Darcy Paterson

Jun 4, 2021  

If you’ve ever read One Up on Wall Street, you’ll know how Peter Lynch talks about cyclicals being great investments. The trick with cyclicals is timing. Getting in near the bottom and exiting near the top.

I’ve added a chart where you can see the performance of XEG.TO (a Canadian oil and gas ETF) compared to the S&P 500 and the NASDAQ. It’s a YTD (year-to-date) chart so about 5-months total.

Some of you might wonder if this kind of performance can continue. A 50% return in 5 months is exceptional. However, I would argue that the valuations of Canadian energy companies are still low. Also, if the price of oil continues its ascent, these companies will continue to reward investors with increasing dividends.