In the past couple of days, amid the crisis in Iraq, the oil prices have been going up. Recently, the Brent price reached a new 52-week high, and on Monday it has edged up by around 0.4% so far to approximately $112.90. At the same time, many investors and analysts became concerned over the situation in Iraq, even though the south of the country is currently not affected by the insurgency in Iraq, and the country is still able to produce and export crude oil.
In a recent interview with CNBC, Jonathan Waghorn of Guinness Asset Management, provided his insights about the oil price, stating that the oil price could go as far as to the $150 mark, being impacted by the growth of the world economy.
“As the world economy continues to grow, let’s say 3% real growth to the end of the decade, we would expect oil prices to inflate alongside. Simple math really takes you to $150 at the end of the decade,” Waghorn stated.
Waghorn also stated that Guinness Asset Management, which returned almost 40% last year, is still fond of energy, stating that it is “an early trade” for the firm in terms of the current macroeconomic environment. In this way, Waghorn said that Guinness runs a long-only energy fund, which consists 100% of equities.
“At the minute we’ve got a balance, we hold all of the majors. We think they are very, very cheap on price earnings, on price to cash flow, on some of the past basis. We still own some U.S. refining, we own a lot of North American unconventional E&P exposure. Recently, we‘ve been adding more European names into the portfolio,” Waghorn added.
Among the top holdings of Guiness Asset Management are companies like Total SA (ADR) (NYSE:TOT), Canadian Natural Resource Ltd (USA) (NYSE:CNQ), and Unit Corporation (NYSE:UNT), however, Guiness has an equally weighted portfolio. Waghorn highlighted another top holding, Newfield Exploration Co. (NYSE:NFX) as a company that “has got a fantastic amount of running room.”
“I think new plays the stack and the scoop, and resources there are growing pretty substantially. And that’s still a very unloved name. It’s less than six times cash flow,” Waghorn said about Newfield Exploration.