What: Mr Kerr Neilson is the founder of Platinum Asset Management Limited (ASX: PTM). He is also the portfolio manager of the group's flagship International Fund.
The Platinum International Fund has significantly outperformed its benchmark the MSCI AC World Index since its inception with a compound annual return more than double the index.
So What: Along with Neilson's record of beating the market, it is well known that he takes contrarian positions. The recently initiated position in Japanese-based Inpex is no exception.
Here's how Neilson described the present oil sector opportunity…
An out-of-favour market and an over-suppled commodity give us an interesting opportunity to take a position on the eventual recovery in the oil price.
While Neilson's search is limited to international investment opportunities, there is no doubt that he would have taken a close look at Australia's oil and gas sector, particularly the recent LNG projects.
Inpex is the 62% owner of the Darwin-based Ichthys LNG project. Based on Neilson's analysis the enterprise value of Inpex equates to just US$5.75 per barrel of oil equivalent (boe). This measure can create a compelling metric to compare other ASX-listed energy investment options against.
Now What: Neilson went on to make the point regarding the general market negativity towards the oil market that "traditionally, this type of unambiguous negativism has led to great returns."
While a cyclical low can create a very attractive entry point into a sector, it's still important that investors undertake careful analysis to identify attractively priced stocks within the sector.
Currently some investors are finding opportunities amongst small oil and gas players with substantial cash balances or asset-backed balance sheets. Other investors are choosing to limit their search to the majors including Woodside Petroleum Limited (ASX: WPL), Santos Ltd (ASX: STO) and Oil Search Limited (ASX: OSH), which are all trading at prices lower than they were a year ago.
