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Energy as an investment

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December 6, 2013, 2:30 pm

The last few years of ups and downs, low rates and global realignments all complicate the question: Where do I put my money? Recently, I had the pleasure of hosting a seminar focused on the energy sector. Walt Stabell, Senior Client Portfolio Manager for Invesco Energy Fund, discussed the idea of investing in energy and why he believes it’s a sector worth looking at now.

Todd Hauer

Todd Hauer

As his presentation pointed out, “Projections indicate in the near future petroleum production is expected to increase 67% from 1990 levels. However, world energy consumption is expected to increase 131% over the same period. Petroleum production is not expected to keep up with demand.”

Energy clearly plays a critical role in the economies of industrialized nations but especially in emerging and frontier markets where economic growth is expected to be faster. I believe it’s a sector investors should not ignore. Our portfolios are currently market weighted in energy, approximately 10%.

Technology continues to play a critical role in consumption, exploration and extraction of oil and gas reserves. We could be looking at a manufacturing renaissance in the US due to our cost advantage for energy, especially natural gas. Oil field services companies are another way to play the energy boom here in the US and offshore.

As Walt pointed out, the world of energy is only broadly defined by oil and natural gas. The energy spectrum also includes coal, uranium, integrateds, chemicals and other alternatives such as; solar, wind and hydro. “Energy sub-sector performance is driven by thematic trends, including factors such as supply/demand dynamics and advancements in technology,” Walt stated.

Other points included in Walt’s presentation:

  • By 2040, China’s energy demand is projected to be double the US level; India is a little more than half despite its faster GDP Growth.
  • Energy demand for renewable & nuclear is growing fast, but fossil fuels will likely continue to represent the majority of demand.

Indeed, a recent Investor Pulse Poll conducted by Morgan Stanley showed that Colorado investors with at least $100,000 in investable assets favored the energy sector above all others. The poll showed that 65% viewed energy as a good investment sector, as compared to 62% for technology, and 60% for natural resources.  Of the various types of energy investments, oil and gas were most popular among Colorado high-net worth investors (26% have invested in oil and gas in the past and 30% plan to do so in the future).

Todd Hauer is a Wealth Advisor and Senior Investment Management Consultant with the Global Wealth Management Division of Morgan Stanley in Denver.  He can be reached at Todd.Hauer@morganstanley.com or 720.488.2406.

The information contained in this article is not a solicitation to purchase or sell investments. Any information presented is general in nature and not intended to provide individually tailored investment advice. The strategies and/or investments referenced may not be suitable for all investors as the appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.  Investing involves risks and there is always the potential of losing money when you invest. The views expressed herein are those of the author and may not necessarily reflect the views of Morgan Stanley Wealth Management, Member SIPC, or its affiliates. Morgan Stanley Wealth Management LLC. Member SIPC.

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