By Annabel Brodie-Smith
Well the good news is we made it to Venice for our first trip abroad since the pandemic. It was amazing – blue skies for sightseeing and café life, clear water in the canals, beautiful art and lots of delicious Italian food. I introduced my husband to the delights of Aperol spritz and it’s a pleasure that has followed us home to the barn.
Back to reality, markets remain concerned about inflation, higher interest rates, a recession and the horrific war in Ukraine. The human tragedy in Ukraine is sadly more depressing and miserable every day.
This month we are looking at the 'yin’ and the ‘yang’ created by current market conditions – the unloved investment companies on wide discounts and the investment companies benefitting from higher energy prices.
Our experienced investment journalist Faith Glasgow goes bargain-shopping for opportunities amongst mainstream investment companies which are trading on wider discounts. Faith delves into the Global sectors, the UK sectors including mid-cap and smaller companies and the Flexible Investment sector which invests in a range of asset types. Well-known companies like Scottish Mortgage, F&C Investment Trust, RIT Capital Partners and Smithson are all covered alongside others.
Meanwhile, Ian Cowie explores the unloved sectors, now “global markets have fallen out of love with ‘jam tomorrow’ stocks”. Ian examines technology stocks, India and Japanese smaller companies – all areas where he is invested. He explains that diversification is key and that overlooked sectors can provide good opportunities for long-term investors. Ian’s investments in Polar Capital Technology, JPMorgan Indian and Baillie Gifford Shin Nippon are all analysed.
With BP and Shell announcing record profits this week for the first quarter, energy prices and the windfall tax remain in the headlines. There are ten investment companies with more than 10% of their portfolio in oil and gas and we asked the managers for their view on the outlook for the oil and gas sector. We also asked managers how they are handling ESG considerations and what the impact of the war in Ukraine will be.
“What we do over the next decade will be critical to mitigating or averting a climate crisis, but unfortunately it seems that a short-term focus on the cost of living and energy security is driving much of the government’s energy strategy.”
Interestingly, Rob Crayfourd of CQS Natural Resources Growth & Income reminds us that oil and gas prices were elevated even before the war: "Despite what global politicians will say, this was mainly due to poor energy policy globally, which has then been exacerbated by the fallout of Russia/Ukraine. The reality is that the weak position Europe had put itself in due to energy security, was a likely contributor to Putin’s timing on Ukraine.”
Renewable energy infrastructure investment companies have also benefited from higher energy prices, performing well. We asked managers for their views on the UK’s new energy strategy, the impact of the Ukraine war and where they are finding new opportunities. Some of their comments are eye-opening. “Most of the public will be shocked to learn that we waste two-thirds of the world’s energy”, says Jonathan Maxwell, Manager of SDCL Energy Efficiency Income Trust.
And Tom Williams, Lead Manager of Downing Renewables & Infrastructure, says: “What we do over the next decade will be critical to mitigating or averting a climate crisis, but unfortunately it seems that a short-term focus on the cost of living and energy security is driving much of the government’s energy strategy.”
I hope you have a good month. The blossom has been out a while and spring has well and truly sprung. There have already been some balmy barbecue days – let’s hope they continue...
Annabel Brodie-Smith Communications Director, AIC
