Perhaps Canadian energy exploration stocks have passed their peak, but industrial metals stocks are on a new uptrend and gold-mining stocks are just getting started in a bull market.

These are possibilities indicated by very long-term trends in relative performance among these three industries. “Long-term” in these examples means since 1927 for gold mines, since 1934 for the industrial metals and since 1938 for the energy stocks.

Think of relative performance, or relative strength, this way: would you rather own a stock that is performing better than the market, or one that lags? This is the value of considering relative performance when making investment decisions. A stock that appears to be a good value based on fundamental analysis may not be the stock to buy if it — or its industry — is underperforming the market.

There are several ways to measure relative performance. The exercise in this case is the most simple: take the annual closing price of the subindex in question and divide it by the overall market index’s closing price — in other words, a ratio.

Keep in mind, though, that the numbers down the y-axes of the accompanying charts are, in and of themselves, meaningless. What is significant is the trend: whether relative performance is rising or dropping, going sideways, or peaking or bottoming. (Numbers shown in these accompanying charts have been adjusted so that they track the same arbitrary range of numbers.)

Over many years, clear patterns emerge, which is why recent results of this survey are so intriguing.

> Energy Stocks. The record begins with the Toronto Stock Exchange’s western oils subindex, established in 1938 as a result of a boom in Alberta oil stocks. This subindex was transformed in 1956 into the oil & gas producers subindex and, in turn, replaced by the present Standard & Poor’s GICS oil & gas exploration and production stocks subindex.

The chart of overlapping relative strength lines for these various energy subindices shows a clear pattern: a peak in the 1930s, a peak in 1980, and another peak at the end of 2005. Despite the change from subindex to subindex, each measures the same universe of companies — the junior and intermediate oil and gas explorers and developers in the West.

The first point to note is the descending highs. These stocks are having less impact on the market from peak to peak.

The second point is debatable. Is the relative strength high at the end of 2005? That was the final high in the bull market that started in the late 1990s.

If you measure the present GICS E&P subindex since it was established in 1987, it has ranged from a low of 8% of the S&P/TSX composite index at yearend 1999 to a high of 30% of the composite at yearend 2005. The E&P subin-dex was 25% at yearend 2007.

So, if the E&P subin-dex closes 2008 below 25% of the S&P/TSX composite, its deteriorating performance will be confirmed. That gives a benchmark to watch as the year progresses. It may also be an indication that other sectors of the energy market will provide better hunting grounds, such as the large producers, oil industry services and integrated companies.

> Industrial Metals Stocks. Over the years, industrial metals stocks — miners of copper, nickel, zinc and lead, primarily — have diminished in relative importance in the Canadian market. Starting as the TSE base metals subindex in 1934, morphing into the metals & mines subindex in later years and now the GICS metals & mining industry subindex, its relative strength has dropped in a well-defined trend. These stocks were profitable to own in rallies, but few are as long-term holdings.

But the rise in these stocks since 2000 has violated that 70-year-long downtrend. The downward drift was first interrupted in the 1990s. This suggests the drop in relative strength of industrial metals shares is ending or has ended. As with the apparent peak in oil and gas E&P stocks, this trend must endure through 2008 to strengthen the case for a new uptrend in industrial mines’ relative strength.

> Gold-Mining Stocks. The relative performance of Canadian gold-mining stocks reveals two periods of superior performance — the early 1930s and 1973-1993. Going by this chart, gold shares are still low in relation to the broad market — this with the price of gold reaching new record high, attained this month. The assumption: if gold is in a bull market, gold-mining stocks have not really started to shine.

@page_break@The historical price record starts with the Dominion Bureau of Statistics (now Statistics Canada) gold mines subindex in 1927. Then there are two sets of TSE gold-mining subindices covering the period from 1934 to 2001, ending with the current GICS gold subindex, which is backdated to 1987.

The recent history, as shown by the S&P/TSX GICS subindex system, shows gold mines have ranged from a high of 60% of the composite index in 1993 to a low of 11% in 2000, rallying to 19% at 2006 and 2007 yearends.

The obvious question is: will golds once again rise to equal 60% of the composite index? That is something to watch in 2008. IE