Amidst these international forces, Nuttall believes Canadian heavy oil producers are among the many greatest alternatives for advisors going into This fall and 2024. He believes that as a result of he’s bullish on the value of oil, but in addition as a result of if US shale peaks traders could very nicely rotate out of shale and into oil sands producers. The oil sands are the longest dated investable reserves on the earth, and Nuttall sees that reality as enticing for US shale traders given the shorter longevity of these reserves.
Maybe most significantly, Nuttall sees basic power amongst Canadian oil producers. He notes that many of those corporations are boasting their strongest steadiness sheets in historical past, they’re producing the best quantity of free money movement of their historical past, and they’re marching in direction of their closing debt targets. When these targets are achieved—which Nuttall thinks will probably be over the subsequent two quarters—these corporations have promised to return between 75% and 100% of that free money movement again to traders, within the type of dividends and important share buybacks.
Whereas a $90 barrel of oil is optimistic information for these corporations, Nuttall sees the maths understanding simply as nicely at $80. Due to these corporations’ steadiness sheets, he sees big alternative for advisors in Canadian oil equities whether or not costs rise or not.
“We see corporations rewarding us by as a lot as 20% subsequent yr at $90 oil,” Nuttall says.
Nuttall admits that whereas he’s bullish on oil costs and Canadian oil producers, there are at all times short-term elements on this area that advisors want to elucidate to their shoppers. Volatility is a continuing in a commodity like oil, and it may generally be a problem to elucidate to shoppers why an vitality inventory is lagging the value of crude. He believes in an actively managed mutual fund technique as a instrument advisors can use to provide their shoppers oil publicity.
