Even in a bull market, not all assets and investment classes will be attractive at the same time. Some of them might be performing better than others, making them more attractive by comparison. Others might simply be contrarian, going low in a bullish market and rising high when the market is down.
Even if two different indexes are performing similarly at any given time, they may not adhere to this trajectory in the coming weeks or months. That applies to both gold and oil right now, as stocks representing both assets are slowly climbing up.
That may not remain the case in the coming months, and if you can only invest in one of the two asset classes, it’s only logical to determine which of the two might perform well in the remainder of 2023.
A gold stock
The year 2023 has been relatively good for gold, and the prices have gone up by a decent margin. The materials index has experienced multiple ups and downs but is currently climbing up at a pace quite similar to the TSX market in general.
But it’s important to remember that even if gold stocks are climbing up with the rest of the market, the underlying asset itself is contrarian. Therefore, the yellow metal is preferred as a hedge primarily for the reason that it holds its value when stocks tend to lose theirs.
If the market is to face any crises in the coming months, gold might shine brighter and emerge as a better choice compared to oil. But if it remains bullish, the gold stocks may keep riding the momentum. A good stock to gain exposure to the gold asset would be Vancouver-based B2Gold (TSX: BTO).
B2Gold is considered a senior gold producer, i.e., more stable and relatively safer compared to junior miners. It markets itself as a low-cost mining company, which leaves more room for profitability. The gold producer has multiple projects in production, development, and exploration phases in Africa, Asia, and the Americas, and one local (Canadian) project.
The stock has a strong history of riding a bullish trend to good heights, especially if it’s a recovery-fueled rally. It rose over 140% in the months after the COVID crash and showed even more compelling growth in 2016, after a years-long slump. It also offers dividends, and the current yield is quite healthy for a gold mining stock.
An oil stock
Oil stocks in Canada rallied hard between late 2020 and mid-2022, and even though the sector has mostly hovered near the 2022 peak since then, it didn’t push through to a new height.
And even though the energy sector has been showing some life in the past few weeks, it’s not reflected equally in all its constituents. TC Energy (TSX: TRP) is an example of a stock that’s currently moving differently to the sector’s dynamics.
The stock is currently overvalued and heavily discounted, which is not a good combination. Moreover, it doesn’t make it a strong representative of oil stocks, especially compared to a rallying gold stock riding its sector’s bullish momentum. However, TC Energy is an investment worth considering for a different reason. As a trusted dividend aristocrat, the discount offers a good opportunity to lock in an elevated yield.
If the sector-wide rally continues and the stock starts following the pattern (belatedly), the recovery-fueled growth may lead to decent short-term returns.
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Foolish takeaway
The two underlying asset classes, i.e., gold and oil, are both worth considering for the rest of 2023. However, it’s important to realize that the individual strengths and patterns of a particular stock are just as important to consider as the sector or asset class they are tied to.
