Q: Hi there, regarding your response today about CNQ, SU, CVE (generally oil stocks), why would you be comfortable buying any of the three recommended? Especially if the war ends relatively soon, S of H opens allowing oil to flow smoothly again and with the over supply story surfacing again sooner rather than later?
Thanks!
Thanks!
5i Research Answer:
There is always an equal and opposing view on every single trade. Note our answer also reflects general sector allocation. Having a 0% sector weighting is a "bet" against a sector. The sector has done well, no doubt. But valuations are still decent, balance sheets are excellent, and cash flow is going to surge this year with higher prices. Yes, oil may decline when the war ends. But in past conflicts the Strait of Hormuz has been impacted after the conflict for some time as insurance companies take a long time to get comfortable again. As before, we would not "load up" on the sector but we think some represetation still makes sense.