A well-timed investment in energy stocks led to a $800,000 TFSA

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  Stocks and Investing on Wed, Nov 05th, 2025 by The Globe and Mail

TFSA‑Trouncer: How Canadian Oil & Energy Stocks Can Outpace the Market

For Canadian investors, the Tax‑Free Savings Account (TFSA) remains a powerful vehicle for building wealth, and the energy sector offers a compelling way to “trounce” the broader market. Eric Nuttall’s recent piece in The Globe and Mail argues that, despite the global shift toward renewables, oil and gas stocks still deliver attractive returns when held in a tax‑advantaged account. By carefully selecting a mix of upstream, midstream, and downstream firms, investors can capture both growth and income while shielding earnings from taxation.

1. The Market Context

Oil prices have been on a roller‑coaster for the last decade, but the most recent surge—from $30 a barrel in early 2020 to $80 a barrel in 2022—has revitalized the Canadian energy market. The pandemic‑driven supply crunch, geopolitical tensions in the Middle East, and a slow rebound in global demand have kept crude prices high, which translates into higher revenue and earnings for Canadian energy producers. Nuttall notes that the Toronto Stock Exchange’s energy index (S&P/TSX Energy Index) has outperformed the broader S&P/TSX composite by roughly 30% over the past three years.

The Canadian dollar’s relative weakness against the U.S. dollar has further boosted exports of crude and natural gas. Since the U.S. has become the largest consumer of Canadian oil and gas, a weaker CAD means Canadian producers earn more when they convert sales to Canadian dollars. In addition, the U.S. Department of Energy’s projections show that U.S. demand for Canadian LNG could climb by up to 15% by 2027, providing a tailwind for Canadian LNG producers.

2. Why a TFSA Makes Sense

A TFSA allows investors to keep the entire growth and dividend income tax‑free. For energy stocks that offer high dividend yields—often 6‑8% or more—this tax advantage is substantial. Nuttall points out that a typical Canadian energy stock’s after‑tax yield could exceed 10% when the 15% corporate tax and 33% dividend tax are removed in a TFSA. For growth stocks, the ability to compound capital gains without any tax drag is even more compelling.

Because energy stocks can be volatile, a TFSA’s flexibility lets investors rebalance their portfolio more often without triggering capital gains tax. “You can ride the oil cycle and then pull back when valuations creep up,” Nuttall says, citing the 2014‑2016 oil crash as a case in point. The article encourages investors to view the TFSA as a “playground” for experimenting with cyclical plays.

3. Building a Diversified Energy Basket

Nuttall recommends a multi‑segment approach that mitigates sector‑specific risk while exposing investors to the full upside of the energy chain.

In addition to individual stocks, Nuttall suggests energy ETFs such as Vanguard FTSE Canada All‑Cap ETF (VCN) for a broad exposure or the iShares S&P/TSX Capped Energy Index ETF (XEO) for a focused play. These ETFs can be used to seed a TFSA and then “unwind” positions if valuations become stretched.

4. Risks to Keep in Mind

Even the most compelling energy play carries risks that must be acknowledged:

1. Price Volatility – Crude and natural gas prices can swing 20‑30% in a single year, affecting both cash flow and share price.
2. Regulatory Risk – Climate‑change policies, carbon‑pricing regimes, and pipeline‑approval delays can cap growth.
3. Geopolitical Risk – Oil supply disruptions in the Middle East or sanctions can tighten global markets.
4. Transition Risk – A swift pivot to renewables could shorten the oil cycle, reducing long‑term earnings.

Nuttall stresses the importance of monitoring these factors through quarterly earnings releases, industry reports, and government policy updates. He also highlights that energy firms that are actively investing in carbon‑capture, green hydrogen, and renewable infrastructure may offer a smoother transition than those solely focused on fossil fuels.

5. Bottom Line: A “Trouncer” Play

In summary, the article frames a TFSA‑based energy strategy as a “trouncer” – a way to beat the broader market by leveraging the tax‑free advantage while riding the energy cycle. For investors who can tolerate volatility and want a portfolio that includes both high yield and growth potential, the Canadian energy sector presents a unique opportunity. By diversifying across upstream, midstream, downstream, and LNG, and by keeping a close eye on geopolitical and regulatory developments, investors can build a resilient TFSA that may outpace the broader S&P/TSX Composite over the long haul.

The Globe and Mail further links to a recent Bloomberg piece on the U.S. LNG export growth and an Energy Canada report on pipeline capacity, both of which provide additional context for the trends highlighted in the article.