Prudent Favorites in Energy
Our allocation to the energy sector has ebbed and flowed over the years, but we remain believers in the long-term thesis that energy demand will continue to meaningfully climb, which should create attractive investment opportunities, explains value investing expert John Buckingham, editor of The Prudent Speculator.
That belief is rooted in the thought that global GDP is set to experience meaningful long-term increases, driven by emerging and frontier economies, as numerous regions around the world industrialize and come into the technological age.
We are always on the hunt for undervalued long-term opportunities in the energy sector, but nowadays we have been focused more on what we consider to be higher-quality names with diversified businesses, stronger balance sheets and broader customer bases.
Yes, we forecast that oil demand will continue to grow, but natural gas and renewables will see the largest global growth of use on a percentage basis.
Given that we cannot be certain of how the long-term mix of usage will shape up, we believe exposure to the major integrated companies provides access to multiple energy sources, with one of our favorites being Royal Dutch Shell (RDS.A).
As increased effectiveness and efficiency for removing oil and gas from the earth is critical, we think the well-established service providers, like Halliburton (HAL) and Baker Hughes (BHI), will remain attractive investment vehicles.
Finally, for those looking for a greater risk/reward profile, offshore oil and gas service provider Oceaneering International (OII) could jump sharply when/if energy prices experience a material increase.