Investing in inevitability
While this is a pretty gloomy outlook in most respects, it does provide an investment opportunity, ‘investing in inevitability’. That is, to find investment opportunities that have a certain inevitability or predictability to the outcome. We see a diversified portfolio of high quality geopolitically safe oil majors as offering this type of asymmetric opportunity for equity investors. With no realistic short term substitutes for oil as a transport fuel and an ever tightening supply market, it becomes incredibly difficult to imagine a world in five to ten years time where the oil price is not higher than where we see it trading today. How high? When? No idea. But it does provide a favourable backdrop for the profitability of oil companies with assets in geopolitically stable regions around the globe, particularly since this has not been factored into current stock prices. An obvious but powerful theme.
NOTES: 1. PC Research 2. Energy Watch Group 3. International Energy Agency 4. Ibid
Matthew Drennan is executive general manager of Zurich Investments
For further information on this topic, click here to read a discussion paper authored by Elliot Bullock, Investment Specialist, Zurich Investments.
