Montreal, Canada

In 2010, junior gold stocks bolted into the stratosphere as investors finally returned to the sector following a crash in 2008. With gold prices about to complete their tenth consecutive year of gains, the bull market is changing direction as large-cap miner’s hunt for reserves the old-fashioned way – through acquisitions. And juniors and mid-cap producers are the targets.

Now it’s junior oil and gas stocks that are poised to blast even higher amid a rush by investors to grab the bull by the horns.

The Toronto Venture Exchange, or S&P/TSX Venture Exchange, is home to Canada’s vibrant but also casino-like junior exploration stocks. Most of the companies listed on this index are junior oil and gas, diversified mining and technology. I hasten to add that most of these companies also have little or no revenue.

Prior to its advent in 1999, the index was previously known as the Vancouver Stock Exchange (VSE) and was often plagued by all sorts of fraud, insider trading, manipulation, stock-trading scandals – you name it. The Toronto Stock Exchange helped to polish her image. But, like most small stock indexes, I’m sure all sorts of suspicious activity continues in what’s known as the Wild West of exploration indexes.

Exploration risk has gained tolerance among investors lately. Though natural gas prices remain depressed, oil has been relatively strong this year and is probably heading to $100 a barrel or more in 2011. This makes speculation an interesting and potentially lucrative proposition in the junior energy space as we approach the New Year. Canadian exploration companies are also active in Egypt, Trinidad and the Falkland Islands, in addition to major properties in Western Canada.

In 2011, I’m hunting for junior oil and gas companies in Toronto, grain-related input companies worldwide and boosting my allocations to gold mining on corrections. Of all sectors, the biggest juice resides in the Canadian energy juniors – but also home to the biggest risk if oil prices slide.