Jadestone Energy Investors - JSE

Jadestone Energy Investors - JSE

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Stock Name Stock Symbol Market Stock Type
Jadestone Energy Plc JSE London Ordinary Share
  Price Change Price Change % Stock Price Last Trade
3.00 3.92% 79.50 12:15:21
Open Price Low Price High Price Close Price Previous Close
76.50 76.50 79.50 79.50 76.50
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mount teide: Post by an investment friend 'Zengas' on the Savannah Energy (SAVE) thread that should be of particular interest to those holding Jadestone Energy stock too: 'Part of a larger article 8 weeks ago in the FT 6/7/21 on the energy transition which has unintended consequences so worth reading in full for greater context. My view is that this is how SAVE in part will catapult to the premier league (as mentioned in the finncap note in June) at much lesser cost that those companies before them that expended on much greater levels of debt and time/effort to reach significant production levels. " A $140bn asset sale: the investors cashing in on Big Oil’s push to net zero Yet despite the intense spotlight on the energy sector, there are potential buyers for these assets — from smaller private players such as Ineos, independent operators who are backed by private equity, opaque energy traders and state oil companies. The cash crunch triggered by the pandemic is creating further pressure to offload assets. Major companies have been forced to cut dividends, dramatically reduce capital spending and raise debt. When their share prices tanked last year, they diverted attention to streamlining operations and trimming costs. The recent spate of deals has been helped by oil prices rising to more than $75 a barrel as lockdowns and travel bans are lifted. But despite this, securing buyers is not an easy task. The pool of buyers able to fill the gap is still relatively shallow and deals are not necessarily simple to execute. “The list of assets is way higher than the number of buyers out there and particularly for some of the bigger deals,” says Greig Aitken, director of mergers and acquisitions research at Wood Mackenzie. Not only are the selling companies having to be more flexible about which assets they dispose of, they are also having to concede on price given that they are prioritising cash buyers who will help to pay down debt and finance their push into cleaner forms of energy. “If others come to us and say an asset is attractive, we will look at it,” says one oil executive. “It’s fair to say — there is definitely an increasing focusing of the portfolio, so you’re going to see more assets out there for sale.” The oil majors are being pushed to turn away from potential cash generators at a time when demand for fossil fuel products is still robust and necessary to meet global energy needs. Even the IEA has conceded the world will need oil and gas for decades to come as renewable producers play catch-up. “These operational assets will mint money like you have no idea over the next three to five years,” says Laurent Segalen, a clean energy investment banker and managing partner at Megawatt-X, a platform which aims to enable the funding of the energy transition. “Hedge funds, private equity, companies you have never heard of, will pick these assets off.” " hTTps://www.ft.com/content/4dee7080-3a1b-479f-a50c-c3641c82c142
mount teide: Institutional Shareholders with notifiable holdings (3%+) and Directors holdings has increased by circa 6 million shares from 72.10% to 73.42% during the last 6 weeks. Significant changes: Fidelity - up by over 8 million shares to 5.20% from 3.47% Major Holdings: 73.42% of stock is held by the largest 10 Institutional Investors & Directors as of 8th September 2021 Tyrus Capital 25.49%, Baillie Gifford 8.45% Odey Asset Management 7.12% Livermore Partners 6.96% Fidelity 5.20% Polar Capital 4.84% Premier Miton Investors 4.12% BlackRock 3.84% Sandgrove Capital Management 3.28% Invesco 3.26% Directors 0.86%. Source: Jadestone Website
lazarus2010: Off Topic The PR roadshow for Empyrean Energy EME is now in full swing. Rig booked, drilling to commence before end of year, pathway to 1.2bln bbls in the 100% success case. 6.5pps could go to 200pps plus. NIAI. DYOR. AIMVHO. GLE WWW.proactiveinvestors.com.au/companies/news/957392/empyrean-energy-maps-out-path-to-spudding-of--world-class--jade-prospect-957392.html Search Proactive Investors for recent talks hTTps://www.share-talk.com/tom-kelly-ceo-director-gaz-bisht-executive-director-china-of-empyrean-energy-plc-eme-l-interview/#gs.axl2sj Broker’s note on the EME bb hTTps://uk.advfn.com/cmn/fbb/thread.php3?id=40022848&from=40009
blueeyes13: I think JSE really need to improve their PR with investors big and small. Volume so low, not late that many investors are even aware of the company and its amazing value and opportunities. I'm a holder in PXC where management were poor at comma but have improved on this area considerably after feedback from shareholders. There's an excellent Telegram group which is followed by the board.
mount teide: Oil Inventories Headed Lower Through Remainder of 2021 - Goehring & Rozencwajg Non-OPEC+ production outside of the US is facing challenges similar to the situation with the US shales. In their most recent report, the IEA reports that non-OPEC+ production outside of the US was down 500,000 b/d in March compared with a year earlier. The IEA projects production from this group will grow throughout the year and that by 4Q21, supply will be 700,000 b/d higher than a year earlier. We disagree with this assessment and expect production will fall short by as much as 400,000 b/d, if not more. Exploration outside of the shales has been extremely disappointing over the past decade and new project sanctions have barely been able to replace base declines. Given the capital budget curtailments around the world, we expect non-OPEC+ production outside of the US will continue to disappoint going forward. Meanwhile, demand is normalizing following the COVID-19 disruptions last year. Although global demand remained 5 mm b/d below its pre-COVID level in 1Q21, it continues to trend in the right direction. Some countries have now either regained or surpassed pre-COVID demand levels. In 1Q21, Chinese demand was likely 1.4 m b/d higher than the same period in 2019. Indian demand was likely within 10,000 b/d of its pre-COVID record as well. Therefore, the two largest sources of demand growth in recent years are now back to their pre-COVID levels. The surge in Indian case data suggests demand may be impacted in 2Q21, but nevertheless the latent demand in the underlying economy appears very strong. This is exactly what we predicted would occur as a direct result of the S-curve. As we have explained in the past, when a country reaches a certain level of per-capita real GDP, their commodity intensity begins to move up dramatically. China and India are both firmly in their S-curve sweet spots and so it is no surprise they are the two countries that are most quickly regaining their pre-COVID demand peaks. As the COVID-19 vaccination distribution continues to accelerate globally, we believe demand will rebound very sharply from here. Indications point to substantial pent-up demand for both leisure and business travel once restrictions are lifted. Government policies meanwhile have left savings rates at all-time highs. Looking forward through the rest of this year, we believe oil market deficits will accelerate, causing inventories to plummet. The IEA currently estimates demand will average 97.6 mm b/d for the remainder of the year. To the extent global vaccine distribution accelerates, we believe this figure could be too low by as much as 1.5 mm b/d. Non-OPEC+ production is expected to grow by 1.8 mm b/d, driven by nearly 1 mm b/d of growth from the US shales. We simply do not believe this is likely given our modeling of core exhaustion and productivity trends. Instead of growing by nearly 1 mm b/d from here, we believe total US production will continue to fall by as much as 400,000 b/d. Based on their figures, the IEA expects the call on OPEC+ to average 44.6 mm b/d for the rest of the year compared with actual production of 41.3 m b/d in April. Assuming OPEC+ returns production according to their recently announced schedule, the IEA expects the market to remain in deficit by 1 m b/d for the remainder the year. Making the adjustments we described (increasing demand and decreasing US shale output), we believe the deficit will exceed 3.5 m b/d, causing inventories to approach record low levels. If our models continue to be correct, global oil markets should remain in deficit even if OPEC+ returns to producing at its all-time high levels. As our readers know, we favor those companies with high-quality assets and sensible balance sheets that trade at favorable valuations. These companies should continue to generate material value as the cycle progresses. One metric we like to use is proved reserves per net debt adjusted share. If a company has high quality assets, it should be able to grow its proved reserves per share; adjusting for net debt helps account for capital discipline. Looking at the universe of US E&P companies, we estimate the market cap-weighted group saw proved reserves per net debt adjusted share fall by 6% for the second consecutive year. Proved developed reserves (leaving aside future undrilled locations) fell by 4%. Our position-weighted average group of companies on the other hand were able to grow proved reserves by 3% and proved developed reserves by 8%. We believe this is a quick way of confirming that we continue to identify the best remaining assets in the US shale basins. We are entering into a new era in global oil markets. While most analysts are concerned about demand, the most important driver will likely be supply. After a decade of robust growth, the US shales are now exhausted, and incremental growth will be very difficult to achieve. Two decades ago, investors worried we were running out of oil while today’s investor worries that we have passed peak demand. Although we cannot say for certain what the coming decade will bring, it will almost certainly defy conventional expectation. The US shales have been an extremely prolific source of supply but we firmly believe their best days are behind them. As this realization sinks in, we believe investors will focus on those companies with the remaining high-quality assets. We recommend investors maintain sizable investments in high quality E&P and oil service companies with a considerable earnings leverage to higher oil prices.' Last sentence is highly likely to sum up the next few years of the currently extremely lowly rated O&G sector very well !
mount teide: Energy Transition Fad Will Send Oil Sky High - Oilprice.com today 'Ironically, the wave of ESG investing in global energy markets may lead to much higher oil prices as a serious lack of capital expenditure on new fossil fuels dries up just as demand for crude continues to grow Pressure from investors, tighter emissions regulation from governments, and public protests against their business have become more or less the new normal for oil companies. What the world—or at least the most affluent parts of it—seem to want from the oil industry is to stop being the oil industry. Many investors are buying into this pressure. ESG investing is all the rage, and sustainable ETFs are popping up like mushrooms after a rain. But some investors are taking a different approach. They are betting on oil. Because what many in the pressure camp seem to underestimate is the fact that the supply of oil is not the only element of the oil equation. “Imagine Shell decided to stop selling petrol and diesel today,” the supermajor’s CEO Ben van Beurden wrote in a LinkedIn post earlier this month. “This would certainly cut Shell’s carbon emissions. But it would not help the world one bit. Demand for fuel would not change. People would fill up their cars and delivery trucks at other service stations.” Van Beurden was commenting on a Dutch court’s ruling that environmentalists hailed as a landmark decision, ordering Shell to reduce its emissions footprint by 45 percent from 2019 levels by 2030. The ruling effectively requires that Shell shrinks its business, meaning it requires one company to work against itself. For any other industry, this would have been unthinkable. But not for Big Oil, which has been targeted as the single party responsible for the rising greenhouse gas emissions produced by humankind. Again, the users of the emission-generating products are being either wilfully ignored or named victims, misled by Big Oil about the harm their products do. The truth, as unpalatable as it is for many in the green transition corner, is that the world still runs on oil. Demand for oil has been rising for decades as our energy needs grow with the global population. The use of fossil fuels is also on a continual rise despite—this is important—the boom in renewable energy capacity installations over the past decade. According to a report by a renewable energy policy network REN21, the share of coal, oil, and gas in the world’s energy mix has not changed over the past decade. So, oil demand is still on the rise, but pressure on the companies that extract oil is growing to the point where these companies are being forced to reduce their spending on future production. There is only one way such a situation could end, and it is with much higher oil prices as demand remains robust. No wonder, then, that some investors are expanding their exposure to oil, as per a Wall Street Journal report from earlier this month. Start Trading On OPC Markets Today CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. The report notes data from Wood Mackenzie that says investments in oil production dropped to $330 billion last year. That’s less than half of what was spent on oil in 2014 when Brent was trading well above $100 per barrel. The pandemic certainly had a lot to do with this. But so did the renewed push for a more renewable energy future. Lower investments in oil mean lower production going forward. This is good from an energy transition perspective but not from an oil demand perspective. And it is a long-term problem. Back in May, Rystad Energy wrote that the proven reserves of Big Oil are falling at a drastic rate: last year, the group lost—meaning failed to replace with new discoveries—15 percent of its reserves. Its existing reserves could be depleted within 15 years. The world will not be off oil by then. The potentially fatal flaw in the energy transition plan is that it appears to substitute one part of the world for the whole world. Granted, there is a lot of talk about helping developing nations to wean themselves off fossil fuel and this talk even includes money but that’s as far as it goes. As Oilprice commentator Syed Rizvi noted in a recent post, there are more than a billion people around the world with no access to electricity at all. Fossil fuels are for them the only source of energy. This is likely to continue to be the case for quite a while, because one other thing the energy transition proponents seem to forget is that even renewable energy is a business—and businesses require profits. Africa is a case in point: the continent has abundant solar and wind resources and yet these are not being harnessed. The reason: there are not enough paying customers for the future solar and wind farms. Investment celebrity Richard Bernstein earlier this week said traders were buying bitcoin in a bear market and ignoring oil in a bull market. Indeed, the latest trends in trading and investing seem to follow fads rather than logic. “We’ve got this major bull market going on in commodities, and all people are saying is that it doesn’t matter,” Bernstein said, as quoted by CNBC. What this shows is a major divide between trader sentiments, policies, and reality. Some traders and politicians seem to inhabit a parallel world in which bitcoin will always be a good investment even when its price is falling off a cliff, and the green energy transition is absolutely unavoidable. In the real world, bitcoin has a considerable emissions footprint and hundreds of millions of people rely on fossil fuels for their energy needs and will continue to rely on it because they can’t afford renewable energy.'
mount teide: Worth reposting this FT article from 5 months ago for some insight into the long term business approach of Jadestone's exploration and risk averse management, with respect to growing the company. “What we’re doing is really mopping up after the majors.” A tried and tested, highly successful MO used twice previously in other maturing oil and gas basins by the Jadestone management to develop multi £billion companies - it should therefore not be a surprise to find a very high, and still increasing, level of high performing Institutional Investors on the shareholders register in the expectation Jadestone will be their third. Compared to the $91m net price paid for the Montara and Stag producing assets, the circa $385m of operating cash flows since generated by these assets to date, together with their estimated current $200 million pr annum of operating cash flow generation at $67 Brent, is astonishing. Montara + Stag ($91m Net paid) - estimated $385m million of operating cash flow generated to date plus current estimated operating cash flow of $200 million per annum @ $67 Brent plus IMO 2020 Premiums Montara + Stag + Maari (Less than $91m net paid) - estimated $405m million of operating cash flow generated to date plus estimated current operating cash flow of $265m per annum @ $67 Brent plus IMO 2020 Premiums Jadestone Energy vows to be ‘last man standing’ in oil and gas production - FT - Davis Shepherd, Energy Editor 'Independent producer sees opportunity to expand as majors pivot to renewables Jadestone Energy might pump just a fraction of the oil and gas of the energy majors, but its chief executive believes the Asia-Pacific focused producer will outlast bigger rivals when it comes to making money from hydrocarbons. “It won’t be a Shell or BP that will be the last man standing in the oil and gas space,” Paul Blakeley, chief executive of Jadestone, said. “It will be the small independents.” It might seem like a bold claim for a company that employs about 220 staff and produces only 10,000 barrels of oil equivalent a day, when giants such as Shell produce almost 300 times more. But it has become Mr Blakeley’s pitch to investors when they question whether there is still a place for small independent energy producers, at a time when concerns about climate change and peak oil demand have seen the European majors begin a long pivot towards renewables. But the former Talisman Energy executive said this will be key to Jadestone’s growth. As the energy majors pull back from hydrocarbons, he sees the opportunity for smaller producers to move in, taking over assets and expanding their lifespan. The exploration drill bit drove short-term success and long-term decline. What we’re doing is really mopping up after the majors Paul Blakeley, chief executive of Jadestone Energy Jadestone is focused on Australia, Vietnam, New Zealand and other countries in Asia-Pacific, where they expect oil demand to continue rising. Pursing older assets marks a significant switch from the old mindset of the $100-oil era, when small exploration and production companies used to pitch high hopes of discoveries in frontier basins as the root to shareholder success. When oil prices crashed almost six years ago, many came close collapse. “Too many [explorers and producers] have relied on the exploration drill bit and many have failed on that basis,” Mr Blakeley said. “The second significant flaw is overleverage. Keeping the risk profile low is very important to our shareholders.” It is a steadier model that is attracting some interest, with Jadestone a rare oil and gas success story in 2020. Shares in BP and Royal Dutch Shell are both down about 50 per cent this year as investor appetite for fossil fuel companies has waned. Jadestone was not immune to oil’s dramatic slump in March and April but shares have doubled in the last eight months from their low point in the depth of lockdowns, giving it a market capitalisation of £256m. BMO Capital Markets has highlighted Jadestone conservative model alongside Energean and Africa Oil as being relatively insulated against lower oil prices and with one of the “strongest cash flow profiles”. Mr Blakeley said the company is still pursuing growth but through acquisitions in the Asia-Pacific region including taking over “stranded discoveries” — those deposits already found but never developed. “I don’t see any reason why we shouldn’t be thinking 50,000-75,000 [barrels of oil equivalent per day] over the next 5-10 years,” he said. “What isn’t material for the majors can be hugely material for us.” The approach is rooted in investors’ fears about the long-term future of the oil industry, should demand peak in the coming decade. Mr Blakeley said he is not worried by that prospect. If oil consumption plateaus rather than crashing, as many industry analysts expect, the world will still need in the region of 100m barrels of oil while gas demand is still expected to climb as a cleaner alternative to coal. That could leave the heavyweight national oil companies churning out barrels while smaller, nimbler players fill in gaps, should the oil majors follow through on plans to eventually reduce production. “The exploration drill bit drove short-term success and long-term decline,” Mr Blakeley said. “What we’re doing is really mopping up after the majors.” '
mount teide: Exxon - A fourth quarterly loss in 2020 after a $20-Billion Write-Down piles the pressure on the company to follow the other oil majors lead and start disinvesting from the sector by transitioning more into clean energy. The Unintended Consequences Of Fossil Fuel Divestment - Cyril Widdershoven / Global Head Strategy & Risk at Berry Commodities Fund. 'The stability of the global oil market is under threat. The impact of COVID-19 and the resultant demand destruction has put an ever-increasing amount of oil and gas producers on the path to bankruptcy. At present, the list of U.S. shale oil and gas producers filing for Chapter 11 is growing by the day, while global oilfield services and offshore drilling companies are fighting to survive. Ultimately, this very dire situation is being driven by oil and gas demand and prices, which is why a degree of stability has returned with oil prices back around the $40-$50 mark. But there is another variable beyond just supply and demand that is now threatening to reintroduce instability to markets. Fossil Fuel Divestment, supported by international governments, international financial institutions, and investors is now threatening to push oil and gas companies into the abyss. In recent weeks, a group of 12 major cities in the EU, USA, and Africa, all pledged to divest from coal, oil, and gas. These cities are home to more than 36 million residents and hold over $295 billion in assets. Led by London and New York City, they have decided to divest from the fossil fuel assets that they directly control and have called on the pension funds managing their money to do the same. The other cities joining the divestment declaration are Berlin, Bristol, Cape Town, Durban, Los Angeles, Milan, New Orleans, Oslo, Pittsburgh, and Vancouver. Activist investors, in-line with the growing Western media onslaught on hydrocarbon production and use, are putting not only the future of international oil and gas producers at risk but increasingly removing the necessary equilibrium between independent (privately owned) oil and gas producers and the national oil companies. For decades, global oil and gas production has been built on several mainstream structures, including the Texas Railroad Commission, Seven Sisters, and OPEC. These structures have helped to stabilize and structure the market to benefit producers, shareholders, and consumers at the same time. The power balance between the Seven Sisters (which in its modern form consists of Shell, BP, ExxonMobil, and Chevron) and OPEC producers has regulated the $1.7-1.8 trillion oil market through times of financial crisis, regional wars, and Black Swan events. This necessary cooperation or power equilibrium is now being undermined by investors and politicians, threatening not only energy and petroleum product supply to global markets but also diminishing the influence of consumer countries on producers, such as OPEC. An increasing amount of international financial giants, such as Dutch asset manager Robeco, are committed to excluding investments in thermal coal, oil sands, and Arctic drilling from all its mutual funds. The Dutch fund stated that it will bar companies that derive 25% or more of their revenues from thermal coal or oil sands, or 10% or more from Arctic drilling. The Dutch asset manager, holding around 155 billion euros ($181 billion), has already excluded thermal coal investment from its sustainable funds. “Our move to exclude investments in fossil fuels from our funds is a further step in our efforts to lower the carbon footprint of our investments, transitioning to a lower-carbon economy,” said Victor Verberk, Robeco’s CIO fixed income and sustainability. Robeco’s move follows a growing list of European insurers and asset managers that have cut investments in fossil fuels, including Dutch insurer Aegon. Robeco said it would complete the exclusion of fossil fuel firms by the end of this year. European insurers, asset managers, and pension funds are not the only ones. Recent reports indicate that global investors have already excluded $5.4 trillion from fossil fuels. The main driver behind this divestment craze is a determination to remove man-made greenhouse gas emissions in order to counter climate change. Reports indicate that 80% of all global emissions come from fossil fuels. To reach the goals set out by governments, emissions need to be cut by two-thirds, or fossil fuel production has to be cut by 1% per year through to 2050. Fossil fuel production has seen a growth of 2% per year in the last 30 years. In the eyes of most investors and activists/governments, divesting in fossil fuel companies will be a major step forward. Some investors are arguing that it is economically sensible to divest based on the stranded asset argument put forward in a major report from the Bank of England. Bank, equity and pension funds are worried that the intrinsic value of fossil fuel assets is much lower than current market valuations. The issue with that argument is that risks are not being taken into account by most investors and politicians. Even if the total value of hydrocarbon producers on stock exchanges has dwindled, the impact of divestment on asset allocation and returns will be immense. Fossil fuel producers make up around 6% of the global stock market and over 12% of the UK market. As some have already stated, excluding an entire sector impacts asset allocation, resulting in increased benchmark risk (relative to the market) and potentially higher volatility. Investment bank Schroders research shows that over the long-term the impact of exclusions on investment returns is minimal. However, it can increase volatility in the short term. Investors are leaving the market, share prices are plunging, company strategies are being changed and production is in danger. In recent months, statements by BP and Shell that they want to move part of their investments from upstream oil and gas to green have been met with plenty of positive reactions from the media, but the announcements should really give observes reason to worry. Going green is putting market stability at risk. Assessments about the major asset re-evaluations by privately-owned oil companies in recent months should be taken with a grain of salt. Even if the world’s biggest oil companies were to slash the value of reserves and current projects in 2020, such as French major Total writing down about $7 billion of Canadian oil sands assets, or Shell’s $4.7 billion hit in the second quarter relating to assets in North America, Brazil, and Europe and a project in Nigeria, the real value is a book value. At times of crisis and uncertainty, it is always attractive to take impairments. Even Exxon Mobil warned in August that low energy prices may wipe out as much as one-fifth of its oil and natural gas reserves. Not only do shareholders feel the pain of lower revenues and dividends in times like these, but hydrocarbon projects become uneconomical. By removing multibillion-dollar hydrocarbon investment projects around the world though, supply will be hit hard in the coming years while demand will continue to grow. Renewable projects are only able to counter the growing demand for energy, not for products. It should be worrying that IOCs, such as Shell or BP are not only divesting part of their global oil and gas acreage and projects but also stopping exploration for new acreage. If oil and gas markets are destabilized further, it will be left to NOCs to save the market. Clean energy analysts seem to have failed to understand that THE STARNED ASSETS OF IOCs ARE ASSETS RIPE FOR OTHERS. Profit margins, dividends, and activist shareholders are not such an issue for Aramco, ADNOC, NNPC, Gazprom, or CNOOC. With lower supply in the coming years, and demand likely to return, prices will increase and margins will go up. This will make the growing list of so-called stranded assets commercially attractive again. But this time they will likely fall into the hands of NOCs(and companies like Jadestone ) rather than IOCs. The future of IOCs and independents is not looking very promising. Lack of access to financial markets and a political-societal drive to block hydrocarbon projects makes some of the world’s largest oil firms look like pension funds or even graveyard construction companies. The future for NOCs, especially the OPEC+ parties, however, is bright. Without activist shareholders to worry about, easy access to financial markets, and SWFs, NOCs are not only able to reap the rewards of the current onslaught, they are also willing. For NOCs there are no stranded assets, every drop of resource can and will be produced and used, as it is part of their national identity. For Western and Asian consumers, however, it will mean that their politicians and companies will need to deal with the new hydrocarbon powers. Dealing with Shell or BP on a European government level is easy. To deal with a NOC, supported by its respective national government, is of a far more complex question. Regulating the market in the future will be a real headache for consumers.'
mount teide: ‘Profits will grow seven-fold' – why oil stocks are set for a bumper 2021 - Telegraph 'The oil sector is primed for a blowout 2021, with profits set to rise seven times compared with 2020. UBS, a bank, calculated which investment sectors would grow their earnings the most next year, according to the views of hundreds of stock analysts. The research focused on American stocks, but sectors across the world behave in similar ways. Surging profits at American oil companies would be caused by a higher oil price and rising international demand, which would also have a positive impact on British firms. UBS found that the energy sector, which is dominated by oil companies, would grow earnings per share by 625pc in 2021. London-listed Shell and BP are among the world’s biggest players. Next was the industrials sector, consisting of engineering and machinery companies such as BAE Systems and Rolls-Royce, where earnings are expected to grow by 79pc next year. The consumer discretionary sector, which includes high street retailers and fashion companies, followed with a 50pc increase. A strong British pick here would be Burberry. These sectors are all considered to be “cyclical̶1;, meaning that profits rise and fall with the health of the economy. This implies that stock market analysts are betting on a strong economic recovery next year, which will boost the shares that suffered most in 2020. In contrast, defensive stocks – such as household goods firm Unilever and drinks giant Diageo – and technology firms will be the slowest-growing sectors next year, according to UBS. Technology businesses will grow earnings by 14pc, consumer staples by 6pc and utilities – such as National Grid – by just 5pc, it found. Mark Haefele, of UBS, said: “We expect the more economically-sensitive markets and sectors, many of which performed poorly in 2020, to lead the charts in 2021. “After a rally of over 50pc in 2020, the top five American technology firms alone now represent around one-eighth of the global stock market. “We think other business areas will see stronger earnings growth in 2021.” Does this mean DIY investors should ditch technology for energy? Mr Haefele said a mixed approach was best as the pandemic had made the world more digital and not all companies would be able to adapt. This means sticking with some technology firms while also backing companies due a recovery. “While we think that in the short term investors can profit by investing in companies exposed to a ‘cyclical̵7; recovery, this needs to be combined with exposure to the disrupters set to drive transformation over the decade ahead, like technology firms,” he said. Adrian Gosden, of GAM Investments, an asset manager, said oil shares could rebound strongly next year but the longer-term outlook was less clear: “Investors are very short term in their investment horizons at the moment. As the oil price crawls over $50 (£37) on the hopes that the new vaccines will get economies moving again, oil firms will once again start making a lot of money and increasing dividends.” He added that Shell and BP would need to pivot from oil to renewables to be viable long-term holdings. “Investors are sceptical it will work and it would take a long time,” he said. Utilities, UBS’s least promising sector for 2021, could turn out to be a great investment because they will benefit from increased use of renewable energy, according to Adam Avigdori, an investment manager at BlackRock. He pointed to ambitious targets and billions of pounds worth of investment promised by Joe Biden, the American president-elect, and the British government. “As a result, we think the utility sector will grow faster than at any stage in recent memory. Combined with good levels of yield, we expect it to be a fruitful investment,” Mr Avigdori said. Investors wishing to follow the professionals into energy stocks could buy the Xtrackers MSCI World Energy ETF, which follows the sector for a low fee of 0.25pc. For contrarians who want to back renewable energy and utilities, the £1.7bn First Sentier Global Listed Infrastructure fund is a good option.'
mount teide: Goehring & Rozencwajg - Natural Resource Investors and Fund Managers - Issued a new report today investigating the huge anomaly between the pricing of commodities and their equities. Well worth a read. Global Resource Anomaly: Commodities versus Commodity Stocks - Goehring & Rozencwajg “The physical commodity markets and the natural resource equity markets are telling two drastically different stories.” At Goehring & Rozencwajg, we are deep-value, contrarian investors. For nearly 30 years, we have been studying long, drawn-out bear markets. One of our observations over the years has been that distinct anomalies develop at or near the bottom of these protracted periods of investor negativity. As investors become increasingly panicked, reason often gives way to strong emotional responses. As value investors, we are inclined to doubt the efficient-market hypothesis. However, we do agree that the broad market serves as an aggregate measure of investor expectations. Therefore, whether the market is right or wrong, you would expect its views to be internally consistent. While this is true most of the time, there are distinct periods where emotion takes over entirely, and Mr. Market appears to offer contradictory advice. We believe these periods are often associated with major market turning points and so we study them intensely. Today we would like to touch on one major anomaly currently underway that we hope is a sign we’re nearing a capitulation bottom in the commodity markets. The largest anomaly we see today is the price action between commodities and commodity stocks. We were quoted in Barron’s on June 28th, 2019. The article discussed how the first half of 2019 was the strongest start for commodity prices in 11 years. The Goldman Sachs Commodity Index advanced by 13% over the first six months of the year to end at 2,497, the highest first-half advance since 2008. Since the bottom in February 2016, the index has advanced by 32%. Focusing on oil, WTI advanced by 30% during the first six months of the year, making it the second highest reading in 11 years. Oil prices are now 125% above their February 2016 lows. An energy equity investor, however, experienced something very different. For the first six months of the year, the S&P Oil & Gas Exploration and Production Index was up only 3%, the sixth worst start to the year in the past two decades. Since oil bottomed in February 2016, this same group is up less than 5%, lagging the commodity price by 120 percentage points. While larger capitalization energy stocks did better since the market bottomed in 2016, even the market-cap weighted natural resource stock index only returned 21% over the same period. The discrepancy in the oil service stocks has been even more stark. For example, since the oil market bottomed in February 2016, the OSX is down 41% despite the doubling of the oil price. So far this year, it is down 3% despite the best start for the commodity markets in over a decade. The physical commodity markets and the natural resource equity markets are telling two drastically different stories. The physical markets are telling you that chronic tightness has emerged in several commodities, while the equity market is telling you the whole sector is nearing distress. Notably, this alleged distress is not being reflected at all in natural resource-related bond prices, often a good indicator of potential trouble. We believe this divergence is incredibly important. Rarely do the commodity markets and natural resource equity markets differ so materially. This divergence should not be ignored. One interesting measure of global commodity demand is the BDI Baltic Exchange Dry Index. This index represents the price to ship dry bulk goods and is a composite of Capesize, Panamax and Handysize vessel day rates. While other factors, including the supply of new vessels, can certainly impact this index, it is often used as a real-time barometer of global commodity demand. We cannot reconcile the idea that global commodity demand is slowing at the same time as the cost to ship that demand is surging at the second-fastest rate ever. While none of these anomalies on their own prove that we are nearing a turning point, we do believe they point to a natural resource equity market that has been gripped by fear and panic. For many investors, last fall was the final straw and we keep hearing of clients who swear never to re-enter the natural resource markets again. As contrarian value investors, these are precisely the markets we like to get involved with. We believe these anomalies are indications that equity investors are not acting rationally, but rather are extrapolating a never-ending trend. The indications are stacking up that this commodity equity bear market is living on borrowed time and that a turning point is fast approaching.'
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