Commodity equities attractively valued, says Skagen
Despite volatility in the commodity markets, companies operating in the commodity space can offer attractive equity, independent manager Skagen Funds says.
Skagen singles out companies with low debt to equity, which are well placed to weather price volatility, and companies operating in emerging markets with growing commodity demand, as good buys. The fund manager argues that price volatility has left many attractive valuations across the sector.
Chris-Tommy Simonsen, portfolio manager and trader for Skagen Global, said: “Commodity markets are creating significant opportunities to invest in stocks of high quality at a good price. We see excellent opportunities for iron ore as mining companies are cheap due to concerns about activities in China and the price of the commodity, a concern that we do not believe is justified. With limited investment in the sector since 2008 there will be a capacity shortfall which will support prices and make this a worthwhile long term investment.”
Ross Porter, portfolio manager of Skagen Kon-Tiki, said: “Investors will benefit from selecting companies in less cyclically sensitive sectors and particularly those invested in emerging markets. The power shortage in South Africa means they are looking to build coal fired power stations and so well established and low priced companies in this area would be strong investments for a longer term outlook”.