Never mind the Brexit — here are energy stocks still worth buying: Portfolio manager
Oil prices have been volatile since the Brexit vote, but there may be opportunities in the energy space, according to one portfolio manager.
Robert Thummel, portfolio manager at Tortoise Capital Advisors, sees crude prices trading mostly in a range between $45 and $55 per barrel for the long term.
Thummel expects uncertainty over Brexit to lead to a greenback rally that, in turn, will put pressure on crude as oil is priced in dollars. Nonetheless, he anticipates that long-term drivers — namely demand from China and India — will support energy prices.
In order to play the sector, Thummel is long several different categories of energy stocks. One is in the infrastructure space, where he is long Sunoco Logistics (SXL) and Enterprise Products Partners (EPD).
“In an environment when the 10-year Treasury [yield] is at 1.5%,” Thummel said, “high-yielding income-producing energy stocks are a great place to invest. Both Sunoco Logistics and Enterprise offer investors really healthy dividend yields — 5% to 7% — plus they grow their dividends every single year and have a track record of doing so. They do that by owning a diverse network of strategic pipeline assets that are absolutely critical to this nation’s energy infrastructure.”
On the production side, Thummel is positive on companies operating out of the Permian Basin in the American Southwest. “Pioneer Natural Resources (PXD) is one of our larger holdings,” he said. “It’s a company that owns a large number of acres in the Permian Basin. It’s growing its production volumes and it’s one of the few oil companies that is growing production volumes in this price environment.”
Outside of petroleum, Thummel is also bullish on natural gas. He is long EQT Corporation (EQT) and Spectra Energy (SE) because of their operations in the Marcellus Shale, a region covering parts of New York, Pennsylvania, West Virginia and Ohio.
“The growth potential for natural gas being produced from the Marcellus Shale will be quite dramatic,” he predicted. “Over the next several years it’s going to fill demand over the long-term basis for not only for the US but for Mexico [and] potentially for Canada.”
