Only a few asset classes can be defined as essential to human existence. Energy is arguably the most important asset of that essential sub sector. An essential asset doesn’t always take precedence in your underlying portfolio, but by simple default via sheer magnitude, it will always have an impact. The world’s economy might be finally able to remove the tourniquet and, with that positive development, CLS believes we can expect to see a resurgence in the energy trade. Currently, the S&P 500 Energy Index trades at a 13 percent discount to the generic S&P 500 Index, and analysts are only forecasting 6 percent profit growth compared to 11 percent, respectively. This leads CLS to believe there are some values to be had, especially on the domestic front. A solid energy business model will almost always generate cash, regardless of macro environments. For proof, just pick a balance sheet from any year over the last 10 for a U.S.-based energy company. Domestic oil production is expected to be the highest in 20 years, which should help offset the annual 5 percent decline in global supplies as reserves are depleted. Whether it is oil, gas, or services and drillers, look for CLS portfolios to reflect positions in this essential asset class.
This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. You should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. You should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not a guide to future performance.
The S&P 500 Index is an unmanaged composite of 500-large capitalization companies. This index is widely used by professional investors as a performance benchmark for large-cap stocks. The S&P 500 Energy Index comprises those companies included in the S&P 500 that are classified as members of the GICS energy sector. You cannot invest directly in an index.
Content provided by CLS Portfolio Manager Matt Santini.