AIM Energy Fund Manager John Segner's Energy Stock Picks

Annotated article summary from this weekend's Barron's. Receive all our Barron's summaries by signing up here:

Energy's Respite Won't Last Too Much Longer by Dimitra Defotis

Summary: Barron's interviews John Segner, manager of the AIM Energy fund, which has 17% average annual returns over the last decade. The energy market will see a temporary improvement in the supply-demand balance in 2007, but will then return to a supply shortage in 2008 and 2009. Current demand is 88 million barrels per day, and "if every oil well in the world were running, assuming 1.2% production growth, we are producing 88 million barrels per day". Demand will continue to rise, driven by India and China, but supply from non-OPEC countries, particularly Venezuela, Nigeria, Iran and Iraq, won't rise sufficiently.

Stocks he likes:

• Natural gas: Bill Barrett Corp. (BBG) -- people haven't realized yet that imports from Canada and GoM are coming down. The company's current discount is due to transmission shortcomings that will soon be remedied with a new pipeline. Southwestern Energy Company (SWN) -- it has the largest position in the Fayetteville Shale in northwest Arkansas, one of the few U.S. natural-gas growth areas. Longer term it will trade significantly higher.
• Oil majors: ExxonMobil Corp. (XOM) -- "I love the company, to be honest." Petrobras Energia Participaciones SA (PZE) -- it has one of the best growth profiles of any major oil company, and has had some success expanding into the GoM's deep water reserves.
• Oil service companies: National-Oilwell Inc. (NOV) -- the world's biggest oilfield rig and rig equipment supplier, it just blew through earnings numbers. Grant Prideco Inc. (GRP) -- it looks cheap and Street estimates are too low. Schlumberger Ltd. (SLB) -- it stands to gain from its international focus, as that's where a lot of the spending is being done.
• Alternative energy: BP plc (BP) -- it's the largest solar developer and very big in other alternatives.
• Nuclear -- it has its issues, but it doesn't have carbon dioxide, and "the political train on CO2 has already left the station." NRG Energy Inc. (NRG) -- it is proposing to build two Texas nuclear plants. Chicago Bridge & Iron Company N.V. (CBI) -- a prime candidate to build nuclear plants. Cameco Corp. (CCJ) -- one of the better uranium plays. Its main mine is flooded, but 10% of the world's supply of uranium and 50% of all uranium growth should come from it.

Related Links: Barron's: Oil Guru Art Smith's Picks for 2007 • World’s Uranium Companies Heading to U.S. Stock Exchanges • Oil Guru Art Smith's Picks for 2007

Comments

[hdunn2:]

I think that nuclear plays are going to become more and more important as awarness of global warning reaches a tipping point and the public begins to demand that the governemnt make changes. Also, with the current administration looking to rebuild the nuclear arsenal, uranium plays should start to have some good prospects.

2007 Mar 19 01:57 AM