Investing in Western Canada provides exposure to emerging market growth in energy and agriculture within one of the most politically stable markets on Earth. In addition, investors who have a ‘value’ orientation have been provided what I believe are attractive entry points into the Western Canadian market by some recent events.
In the energy sector, the credit crisis has caused financing to become scarce for junior oil & gas companies while low natural gas prices are reducing their profitability. They are being forced to sell assets to stay in business. This has created a buyers’ market for the acquisition of smaller oil production assets – assets that are highly cash-flow positive at current oil prices.
In the agriculture sector, the regulatory barriers that made it difficult to invest in Saskatchewan farmland have recently been liberalized, allowing capital to move in and acquire the cheapest farmland (on a productivity basis) in Canada and perhaps the world.