Tim Guinness, Chairman and Chief Investment Officer of Guinness Asset Management Ltd. and Guinness Atkinson Asset Management, Inc. Interviews with the Wall Street Transcript: Investing in Energy Stocks in Africa and Beyond
67 WALL STREET, New York - October 26, 2012 - The Wall Street Transcript has just published its Investing Strategies Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Socially Responsible Investing - Value Investing - Small-Cap Investing - Evidence-Based Investing - Risk Management - Downside Protection
Companies include: China Petroleum & Chemical Cor (SNP), PetroChina Co. Ltd. (PTR), CNOOC Ltd. (CEO), Valero Energy Corp. (VLO), Exxon Mobil Corp. (XOM), Chevron Corp. (CVX), BP plc (BP), Enersis S.A. (ENI), Total SA (TOT), Helix Energy Solutions Group, (HLX), Peabody Energy Corp. (BTU), Cameco Corp. (CCJ) and many others.
In the following excerpt from the Investing Strategies Report, an experienced portfolio manager discusses his outlook for investors:
The second major headwind of the last 15 months was that the natural gas price was very weak in 2011 and right through to March 2012. This headwind is also now a tailwind. Gas has now bottomed, and it's going to go on recovering for the next three years, and that's going to be very good news for a lot of the energy companies that we own.
The last headwind becoming a tailwind is the prospects for the oil price. I believe is going to settle down in the $80 to $100 range and not crash down to $50 to $60, which some commentators feared. This steady high price is also very good for the energy companies that we own.
Add to that the fact that energy companies are very cheap. The price earnings multiples you are paying for a collection of stocks, such as those we own in our fund, is around nine to 10 times this year's earnings. That compares with the broad market at 15 times or so. If you look at history, there is no rule that says energy stocks will trade at a discount to the broad market - in fact, half the time, they trade at a premium. I will make a prediction that at some stage during the next three years the price earnings multiple of the energy sector will go to a premium of the broad market.
I then come to another reason that energy is potentially quite an interesting place to invest in. That it is in the long run a good store of real value. In the long run, the oil price and the gas price, for that matter, can keep up with the inflation. If you go back to 1960 and you look at three things - the price of housing, gold and oil - you will find that the price of the average house has gone up by about 40 times. You then look at the price of gold, you find that it rose from $45 to $1400, so that's also 40 times. You then look at the price of oil. It went from $2 to $80, and there you go, it has also gone up 40 times.
And I am afraid that not next year or the year after but I think in three years' time, we will be beginning to worry about inflation quite a lot because of the quantitative easing that we have seen. There is going to be a price for expanding the money supply to support the economy. And that price will be a pickup in inflation. So you want to place your investments in ships that can carry your savings through that potential storm.
TWST: Please explain your investment philosophy and tell us why you favor equally weighted positions.
For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
