Energy equities in oil and gas offer value on price/earnings multiple terms as markets are expected to continue to slowly recover and the U.S. economy avoids a double-dip recession, says Tim Guinness, Chairman and Chief Investment Officer of Guinness Asset Management Ltd. and Guinness Atkinson Asset Management Inc.
“There’s also the standout dividend yield of a number of the super majors, and you’ve got the services sector, which was beaten down in 2009 and 2010, but began to recover in the second half of 2010, actually beating to quite a different drum to much of the rest of the economy,” Guinness said. “There’s a very distinct uptick now in the oil and gas service company business cycle.”
Guinness says although he does not favor offshore drillers who have been adversely affected by the Gulf of Mexico Macondo spill, he does like BP plc (BP) among the European super-major oil companies. He believes BP is a standout in value terms despite the negative publicity it has had on Macondo and Russia.
“We have a big bias toward investing in companies that have got production, have got decent oil and gas reserves, as well as those service companies that are big solid businesses making profits and so on,” Guinness said. “So when you look at our portfolio, you will find that the vast majority of the companies we own are established businesses just now often on a price/earnings multiple of below 10.”
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