Investment theme: Energy
The oil and gas boom in North America is a turning point for the worldwide energy sector. By the end of this decade, the US will be able to produce more fossil energy than the traditional providers, Russia and Saudi Arabia. The tailwinds that would arise from this abundance of cheap energy could also result in a renaissance in the manufacturing industry.
Never in history has so much capex been invested by the energy sector in the development of traditional fossil energy resources as in the last few year. At the same time, capex deployed for renewable energy sources and alternative energy projects has declined by over 25% in the past 2 years. Therefore, one should clearly focus on investments in a) traditional energy related stocks, b) midstream operators such as pipeline operators, and c) refiners.
Midstream operators are in general characterized by stable cash flows, high profitability, and elevated income distribution to investors.
Our list of favorites:
| Company | Ticker | Sub-Sector | Upside Potential | Sharpe (FY01) |
| Tesoro | TSO | Refining | 13.2 % | 3.41 |
| Investment case: Seasonal retail fluctuations can be played with this stock. Additionally, Tesoro and the rest of the refining industry will benefit from a widening spread between Brent and LLS crude. |
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| Company | Ticker | Sub-Sector | Upside Potential | Sharpe (FY01) |
| Halliburton | HAL | Oil services | 18.2 % | 5.21 |
| Investment case: Strong international deals led to strong Q4 revenues (up by 19%). Further good performance can be expected from this company, which is currently harvesting sound past investments. |
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| Company | Ticker | Sub-Sector | Upside Potential | Sharpe (FY01) |
| Noble Energy | NBL | Oil & Gas | 23.2 % | 5.52 |
| Investment case: The Israeli gas licenses sold to Woodford (Australia) for more than USD 1 billion strongly support NBL’s NAV. NBL presently trades at a premium to its peers, but still at a discount compared with historical ratios. |
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| Company | Ticker | Sub-Sector | Upside Potential | Sharpe (FY01) |
| Pioneer Natural Resources | PXD | Energy | 14.9 % | 3.34 |
| Investment case: PXD is trading, based on a EV/EBITD, with a premium to its peer market group. The company increased its exposure to the Stan Druckenmiller field by 38%, which will improve its future production capacities. | ||||
| Company | Ticker | Sub-Sector | Upside Potential | Sharpe (FY01) |
| Marathon Petroleum | MPC | Energy | 6.3 % | 3.4 |
| Investment case: MPC’s Q4 revenues climbed by 20%. | ||||
| Company | Ticker | Sub-Sector | Upside Potential | Sharpe (FY01) |
| Anadarko Petroleum | APC | Oil & Gas | 14.2 % | 4.5 |
| Investment case: APC has a compelling valuation vs. its peers, even after recent price increases. Anadarko shares now figure in David Einhorn’s portfolio. | ||||
| Company | Ticker | Sub-Sector | Upside Potential | Sharpe (FY01) |
| Apache Corp | APA | Oil & Gas | 10.9 % | 5.34 |
| Investment case: APA is a long-term winner in the shale gas play, which is now unfolding in the East Texas region. |
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| Company | Ticker | Sub-Sector | Upside Potential | Sharpe (FY01) |
| Kinder Morgan | KMI | Energy | 14.2 % | 5.64 |
| Investment case: Kinder Morgan is the largest midstream operator. KMI is a quality dividend stock. Its last dividend was USD 0.41 per share. |
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| Company | Ticker | Sub-Sector | Upside Potential | Sharpe (FY01) |
| Peabody Energy | BTU | Coal | 15.1 % | 3.39 |
| Investment case: The coal supply-demand imbalance could improve quicker than expected with sanctions against Russia unfolding. Peabody’s asset mix, cost structure, and debt maturity schedule give it one of the stronger operating profiles today. | ||||
| Company | Ticker | Sub-Sector | Upside Potential | Sharpe (FY01) |
| Cabot Oil & Gas | COG | Oil & Gas | 16.7 % | 3.99 |
| Investment case: Cabot’s Q4 profits climbed 91% upon higher production; the recent underperformance of the stock offers a buying opportunity. | ||||
| Company | Ticker | Sub-Sector | Upside Potential | Sharpe (FY01) |
| Royal Dutch | RDSa | Energy | 13.8 % | 6.16 |
| Investment case: RDSA combines solid fundamentals with a highly positive technical constellation. The Sharpe ratio (FY01) is highly attractive. | ||||