Artemis Global Energy fund to spend half of cash on acquisitions

Managers of the UK-based Artemis Global Energy fund plan to spend half of the portfolio’s current 10% cash level on near term acquisitions.

Selling out of positions where stocks have reached target prices, ongoing gains from M&A activity, and increasing deposits by investors through March have left the fund with a 10.2% cash level, roughly double the fund’s objectives. Given the total cash is worth about £10m, this implies they are set to spend £5m.

Stocks where this money could be invested include Apache, TransGlobe Energy, and Anadarko.

Managers Richard Hulf and John Dodd remain bullish about the prospects from the sector. Their focus is not exploration, but companies that have proven assets that could grow in future, or proven assets that are attractive to other companies, thus benefitting from M&A activity. Their portfolio is concentrated, about 40 stocks, but there are enough good corporate stories globally that this type of active management is going to continue to produce results for investors, they said.

Key energy trends continue, they add, such as the development of the Chinese car market, where there are still just 37 vehicles per 1,000 population against 809 per 1,000 in the US. Data such as this points to continued growing demand for energy to manufacture vehicles and keep them driving on the road.

The global nature of the fund means that they are looking for investment opportunities across all regions, including East and West Africa, Southeast Asia, Central Asia and Russia. Latin America, particularly Brazil is important, as is the affect of cheap natural gas in the US, but the strategy of the fund will not see it buy into prospecting in places such as the Falkland Islands. “It is technically too early,” Hulf said.

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