Timely thematic topic: Positive 3rd party outlooks on energy

Energy 2/04/2021
Download as PDF

We are extremely optimistic about the energy sector in 2021. We believe there are several tailwinds from both a macro and company-specific perspective. Vaccine distribution should lead to a reopening of the economy. This, combined with significant stimulus from the Biden administration and a likely infrastructure bill, should lead to a series of macro events including rising interest rates, higher inflation, a weakening dollar and a steeper yield curve. Assuming these events occur, the predominant thought on Wall Street is to rotate portfolios. Winners would seem to include value versus growth, cyclical versus defensives, small cap versus large cap and high dividends and high free cash flow yields versus not. We think that energy, and specifically midstream energy, checks a lot of those boxes. But don’t just take it from us, hear from several well known names in asset management.

Even as energy company executives cut estimates for long-term growth, near-term opportunities are increasing. The return to “normal” increases both industrial activity and mobility, and the price of West Texas Intermediate oil rises to $65/bbl. Rig counts increase and energy high yield bonds rally soundly. Energy stocks are among the best performers in 2021.

Byron Wien and Joe Zidle Announce the Ten Surprises of 2021

Looking at the 2020s, we believe that similar structural forces to those which drove commodities in the 2000s could be at play.

Goldman Sachs 2021 Commodity Outlook: REVing up a structural bull market

Energy Pipelines.

#1 Best Income Investment for the New Year
Barron’s December 31, 2020

…leading some groups that have trailed the market for years, such as banks and energy, to move from laggards to leaders.

Bill Miller
4Q2020 Market Letter, January 5, 2021

My favorite market sector is the natural gas pipeline group, with yields between 9% and 12% for investment grade stocks with certain tax advantages.

Bill Gross
January 2021 Investment Outlook: Little Bit Softer Now

The statements on this page are the opinion of third parties and may not encompass all views on the sector. Projections on this page are no guarantee of future outcomes. Not a recommendation to buy or sell a specific security.

This commentary contains certain statements that may include “forward-looking statements.” All statements, other than statements of historical fact, included herein are “forward-looking statements.” Although TortoiseEcofin believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect; actual events could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors. You should not place undue reliance on these forward looking statements, which speak only as of the date of this publication. TortoiseEcofin does not assume a duty to update these forward-looking statements. The views and opinions in this commentary are as of the date of publication and are subject to change. This material should not be relied upon as investment or tax advice and is not intended to predict or depict performance of any investment or any fund managed by TortoiseEcofin. This publication is provided for information only and shall not constitute an offer to sell or a solicitation of an offer to buy any securities.

Past performance is no guarantee of future results.