Where can investors hide?
An interesting point for investors is that, Groppe says that as a result of the Iranian Revolution, “something like 30% of the value of the S & P in 1980 was the energy sector, and today its more like 6%-7%, and significantly last year the energy sector generated 23% of all of the earnings of the S & P 500.” “We expect it to rise to the 15%-20% range” in the future.
Going right along with this bullishness on the energy sector, and historical low point for the weighting of the energy group in the S & P, Groppe says, “I think the easy oil has been found, but in general, in our work, we conclude that oil and gas assets are still significantly undervalued based on the long term price outlook that we see.”
To get a little bit more specific, Groppe’s favourite group is the Canadian oil patch. “We would classify Canada as perhaps possessing the most attractive combination of circumstances for energy investment of any place in the world. It is only a quarter as intensely drilled and exploited as the United States” and “I suspect that in the next several years the oil sands reserves will be raised to be higher than Saudi Arabia’s.” In that same vein, Groppe predicts “within 10 years we have Canada as being the largest non-OPEC producer in the world outside of Russia.”
The man puts his money where his mouth is, and says that “90% of all of my equity investment assets are in energy, and 65% of that is Canadian.” He also says, “We think there is still a good long run ahead with the kinds of prices that we see”, which should be a positive, and somewhat comforting for investors in the area, considering Groppe’s enviable and unmatched oil forecasting record, both in longevity and accuracy.
PS. Read the whole thing anyway.