Blue Whale reveals first investment in energy sector

Popular investment fund Blue Whale has added Canadian Natural Resources to its portfolio, marking its first entry into the energy sector.

Blue Whale growth fundbacked by Peter Hargreaves, has seen its performance suffer in recent times as higher interest rates diminish investors’ appetite for growth stocks.

The fund was down 27.6 percent from 2022, trailing the IA Global sector’s average loss of 11.1 percent.

The energy investment marks a shift in tactics after Blue Whale sold positions in US tech star names over the past year.

Last summer, the fund shed long-term positions in US technology stocks amid concerns about higher interest rates and rising inflation.

It sold its stake in Google’s parent company Alphabet, as well as stakes in Amazon and Meta, and no longer holds so-called Faang shares.

Last month, Blue Whale’s factsheet showed a 4.1 percent allocation to the energy sector, but the fund remained silent on where it had invested.

Today it announced it had added oil company Canadian Natural Resources, which it said has “quality levels and structural growth drivers in abundance.”

Like most companies in the energy sector, Canadian Natural has done well, rising nearly 24 percent over the past year.

While the company had been on the fund’s radar for some time, fund manager Stephen Yiu said he was cautious about investing in energy in general.

Now the sector is becoming “much more attractive” and is “likely to account for a larger share of global GDP in the medium to long term.”

Yiu said, “The company itself owns some of the highest quality oil assets in the world – the crown jewel of which is the oil sands mines in Alberta, Canada.

“What makes these mines so important is that their reserves are expected to last about 45 years — extremely favorably compared to the average U.S. shale company reserves of about 10 years.”

With oil prices currently above $75 a barrel and Canadian Natural’s breakeven point at $30 a barrel, and minimal capital expenditures, it will likely have a healthy margin.

“This compares favorably with conventional oil assets, which are down about 10 percent a year, and as much as 40 percent a year for U.S. shale oil.”

He believes oil prices are likely to remain elevated for some time due to supply issues in the US, Saudi Arabia and Russia.

He pointed out that Saudi Arabia, and OPEC as a whole, lack production quotas, showing that “spare capacity” is almost exhausted.

Combined with deteriorating relations with the US, this is likely to lead OPEC to limited supply growth.

With major oil producing countries suffering for one reason or another, Canada has an ace up its sleeve in the form of its ESG credentials.

While the discussion of ESG may seem laughable when it comes to fossil fuel producers, a more socially and environmentally conscious end consumer will feel more comfortable with the consumption of natural resources if the company can demonstrate initiatives to reduce environmental impact and the are social references.’