Bringing you live news and features since 2013
Bringing you news, views and analysis since 2013
Angelos Damaskos, CEO, Sector Investment Managers and Fund Advisor, Junior Oils Trust

8363

Comment: Current undervaluation of oil companies cannot continue

RELATED TOPICS​

Oil companies are currently undervalued but the situation cannot continue for long, says Angelos Damaskos (pictured), CEO, Sector Investment Managers and Fund Advisor, Junior Oils Trust…

The Junior Oils Trust has been conservatively positioned since the beginning of the year with significant cash reserves and an allocation to corporate bonds. This positioning has provided some insulation against market weakness as a result of the Japanese earthquake, the Eurozone debt crisis and now, the indiscriminate sell-off of equities. The fund currently holds approximately 14% of its portfolio in corporate bonds and around 5% in cash. We have been selectively investing available cash reserves into equities since May and are finding many attractive companies with sound fundamentals are trading at extraordinarily cheap valuations.
 
The oil price has been weakening since its two-year high in May, with markets in free-fall in August on realisation of the size and complexity of the debt problems in developed economies. The American debate over the national debt level and the subsequent downgrade of the nation’s credit rating has also exasperated the situation. However, we believe that current share prices show a large dislocation from the price of oil, discounting long-term oil prices of around USD60/barrel. Companies are therefore undervalued, and this dislocation cannot continue for long.
 
While demand for energy and oil may slow, it will not fall dramatically. In China for example, demand continues to grow, albeit at a slower rate. The country’s industrialisation and urbanisation requires greater energy input and its imports of oil are still growing. In addition, the developed world has an established standard of living that demands a certain energy input – a slowing economy may mean greater care over energy usage, but any cuts will be small.

Latest News

Morgan Stanley Investment Management (MSIM) has announced the launch of the MS INVF Systematic Liquid..
Confidence in the continuing strength of bitcoin and Ethereum is driving wider interest in altcoins..
Discretionary fund manager ebi Portfolios, and asset manager Amundi have launched the SRI portfolio range,..

Related Articles

n response to the increased attention to climate change risk, institutional investors, asset managers, and asset owners in the US are committed to implementing a variety of measures to address climate change and reach their net-zero goals, according to Cerulli Associates...
n response to the increased attention to climate change risk, institutional investors, asset managers, and asset owners in the US..
Lord Hollick, House of Lords
A House of Lords committee has raised “significant concerns” over the role of UK regulators, their ability to operate with genuine independence from government and how they are held to account...
A House of Lords committee has raised “significant concerns” over the role of UK regulators, their ability to operate with..
Rob Edwards, Morningstar
The complexities of assessing performance from responsible investment strategies have been laid bare after Morningstar’s ESG indices delivered a mixed bag in 2023...
The complexities of assessing performance from responsible investment strategies have been laid bare after Morningstar’s ESG indices delivered a mixed..
David Vieira, JTC Group
Investment trusts are the latest sector of the financial services industry to come under fire for failing to cater adequately for responsible investors...
Investment trusts are the latest sector of the financial services industry to come under fire for failing to cater adequately..
Subscribe to the Institutional Asset Manager newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by