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iShares S&P/TSX Capped Energy Index ETF (XEG)
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Horizons Canadian Oil and Gas Equity Covered Call ETF (ENCC)
Q: What do you think about this ETF for the rest of this year? I like the chart , it's turning up. Thanks
5i Research Answer:
The ENCC ETF has equal-weight exposure to some of the largest Canadian oil & gas companies, and it uses a covered call strategy to boost income. Its distribution yield is 13.8%, and performance of the ETF will largely depend on the price of oil, and the performance of oil and gas companies. For a direct play on oil and gas companies, we would prefer the XEG ETF, which has a much lower yield, but will demonstrate higher capital appreciation than ENCC.
A lot of ENCC's performance for the rest of the year will depend on oil, and oil has been breaking out recently. We feel that there is some upside potential left in the price of oil until the end of the year, but it has had a significant 30% run since June.