Volatility, oil dislocation present opportunity for equity advisors

Volatility, oil dislocation present opportunity for equity advisors

Volatility, oil dislocation present opportunity for equity advisors While volatility in the market can be gut-wrenching, it does present opportunities to put money to work at attractive prices – something far from lost on portfolio managers looking at the energy sector.

“To be quite honest, there is not a lot of funding in places like Calgary these days,” says Tim Caulfield, vice president, Franklin Bissett Investment Management’s director of equity research and a portfolio manager, “but it is a pretty exciting time for us as investors, and our dollars will go quite a long ways in the energy sector.”

As oil remains at record six-year lows, there remain fears that those prices will continue falling on worries that a global glut of crude is growing.

“What is interesting to us, there is no question in our minds that a producer of oil is worth less in a lower oil price environment,” Caulfield told WP, “but it is what the market is handicapping as well, as we believe we’ve seen a big overreaction to the downside of a lot of the equities.”

The market is now as a whole 7% off its 52-week high, which was established on April 15, 2015, and that was really driven by the strength of sectors like consumer staples, health care and information technologies, to name a few.

“It is these pockets of real strength – like your Dollaramas – where we’re seeing new 52-week highs, it seems, every day. And at the same time we’re seeing new lows in the market ,” he says.
“It is those dislocations that create those very attractive opportunities.”

That is different from 2009 when you could buy energy equities on the cheap, says Caulfield, but so was everything else.

“Today, we’re more convinced that energy is becoming quite a bit dislocated from what is going on elsewhere in the equity market itself,” says Caulfield. “That is the long play.”