The undervaluation of the oil companies cannot continue for much longer, according to the Junior Oils Trust.
The recent weaknesses in the global markets, including the “free-fall in August” have contributed to the “dislocation” of share prices from the price of oil.
“Companies are therefore undervalued, and this dislocation cannot continue for long,” says Angelos Damaskos, the fund advisor for the Junior Oils Trust.
Having positioned the portfolio defensively since the beginning of the year, taking out significant cash positions alongside a 14% weighting to corporate bonds, the fund is moving back into equities to take advantage of what is being seen as a strong buying opportunity.
“We have been selectively investing available cash reserves into equities since May and are finding many attractive companies with sound fundamentals are trading at extraordinarily cheap valuations.”
Even within a slowing global economy, demand for energy will likely continue to grow, albeit at a reduced rate, as demonstrated by China’s increasing rate of oil imports.