Canadian trusts originally got their hot reputation because most of them are based on oil and gas with big dividends. The energy boom attracted thousands of investors. But recently, with oil and gas prices taking a breather, some of them have come on the market at rock-bottom rates. In some cases, they're selling for less than the value of the proven assets they have in the ground. Oil at discount -- as low as 42 cents on the dollar.
The Cheapest Place to Buy U.S. Oil Wells: in Canada!
If there's a better bargain than oil at 42 cents on the dollar, we don't know what it is.
And, owing to the quirks of tax laws, you can buy U.S. oil and gas wells with less tax through Canadian trusts than through your brother-in-law in Texas.
Overall, CanTrusts are more stable than U.S. stocks but a tad more volatile than U.S. utilities (which isn't saying much)!
Yet now and then, they can provide you with some interesting behavior. (If you're a retiree, you may be more interested in the electric power or pipeline trusts, which are steady to the point of boredom). But at the other end of the spectrum, you have oil and gas trusts, which can be as exciting as, well, oil prices.
Both oil and gas trusts in Canada are still yielding up to 16%, or even more. This is astonishing since oil and gas prices are just rebounding from their brief vacation in the south.
But here's the corker: Some of them have dipped down to rock-bottom rates and they can be snapped up for less than their fire-sale, break-up value. In fact, you can buy some trusts for the same price now as when oil was at $20 a barrel. If you want an example of the upside you can expect, early in 2008, when oil was $90 a barrel, Enerplus Resources Trust (NYSE: ERF) was valued at $45 for each barrel of oil equivalent it owned. And of course Enerplus sold this $45 oil at $100 - $140 later.
It's fun to realize that you just became the part owner of a fleet of oil wells for $30 or even $20 a barrel, and these statistical quirks are available to you right now.