Email of the day
Comment of the Day

May 08 2014

Commentary by David Fuller

Email of the day

On investing in the now rapidly changing energy sector:

“I saw this and found it surprising and, if true, a view that should alter my investing ideas for the energy sector long-term. I would be most interested in your opinion on it.

“Look forward to seeing you tomorrow!”

David Fuller's view

Thanks for the interesting article and I look forward to seeing you and other subscribers at The Markets Now event tomorrow.

The energy sector is changing rapidly, thanks to an accelerated rate of technological innovation, plus a powerful needs-must incentive because the world will need more and preferably cheaper energy to prosper, and we also need cleaner energy for the well being of ourselves and our planet.  

I have one significant (for me) energy investment, as you probably know.  It is Royal Dutch Shell (RDSB LN) which I bought partly for income when it was yielding more than 5%.  It tested my patience, and those of some subscribers who also own it, but is currently performing reasonably well.  I also hold the giant miner, BHP Billiton (BLT LN), which also has oil interests.  Interestingly, these ‘sleeper’ chart patterns are not all that different, as resources stocks are often contra-cyclical performers.  RDSB has woken up and I think BLT could follow that lead, hopefully before yearend. 

For the sake of diversification, I do not want more big oil companies or miners in my portfolio, although these sectors are beginning to perform, valuations are low and the yields attractive. 

I am considering my first renewable energy investment.  This would be in solar energy because I maintain it will dominate the renewables industry in future years being much more efficient and compatible for office building and homes, and with fewer negatives than other forms of renewables. 

However, there is a big speculative element because as we have seen with any exciting new field, dozens of companies are launched, many will soar temporarily but most will not survive on their own.  The technology is improving rapidly but few of these companies make any money at present, share selection in a new industry involves commonsense and plenty of luck.  At least we can assess the sector for a while without the frenzied presence of momentum investors.

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