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Bay Street betting on energy in 2016

Canadian oil and gas stocks struggled to stem dramatic declines this year, but a new BNN poll reveals the sector is expected to stage a comeback in 2016.

Investors who regularly provide expert analysis and advice on BNN’s Market Call and Market Call Tonight programs were asked to share their expectations for the new year via an online questionnaire. Asked to rank which TSX sub-sector is most likely to be the top performer in 2016, more than one third of respondents (34.8 percent) said energy. Forty-six portfolio managers and investment executives ranked their preferences among the ten sub-sectors.

Experts around the world almost universally expect oil prices to be dramatically higher by the end of 2016. Bay Street pros are no different in their unofficial estimates, albeit more bearish.

The average expectation for the North American benchmark West Texas Intermediate oil price among the 59 Bay Street veterans who expressed an opinion was almost exactly US$50 per barrel by the end of 2016, yet the range of expectations was incredibly broad.

For example, 8.5 percent of responses were for prices to be below US$40 per barrel one year from now – one even believes crude will be trading at US$24 per barrel by the end of 2016. Conversely, the same proportion of responses were for prices to be above US$60 per barrel, with four respondents expecting oil to be worth US$65 per barrel or more in 12 months.

Bay Street is also planning to bet on a rebound in the value of Canada’s oil and gas equities. Of the stocks respondents said they would go long on in 2016 (meaning they intend to maintain those investments for extended periods of time), four of the five to receive more than one mention were energy companies.

Respondents were also asked to name stocks they would short next year (meaning they expect the shares to decline in value) and only one Canadian oil and gas producer – Suncor Energy – was mentioned more than once. Valeant Pharmaceuticals, Tesla Motors, Teck Resources, Netflix and Amazon were the other stocks where at least two respondents said they expect the value of those shares to decline in 2016.

 

 LONG

 SHORT

 Tourmaline Oil (2 votes)

 Valeant (3 votes)

 Canadian Natural Resources (2 votes)

 Tesla (3 votes)

 Baytex (2 votes)

 Suncor (2 votes)

 Enbridge (3 votes)

 Teck (2 votes)

 Element Financial (3 votes)

 Netflix (2 votes)

 Amazon (2 votes)

Of course, if crude oil prices remain stagnant through the majority of next year – as some experts warn it might – expectations for Canada’s energy sector to stage a comeback could also go slack.

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