Investment

What can you do during this particularly hot summer?

by Angel Sanz

What can you do during this particularly hot summer?

Even if growth slows down, the theme of energy transition has plenty to appeal to investors.

Squaring the circle

Growth in the global economy remains modest and, with rising interest rates, is set to slow in the US, Europe and Asia. Against this backdrop, equities in growth sectors should be good investments, but their valuations are already demanding. Admittedly, there are some value sectors that benefit from very attractive valuations, such as oil companies and banks, but these two sectors are experiencing structural problems over the long term.

What’s more, although most investors support responsible investment, the world is still very polarised on the subject, and not everyone agrees to subject their investments to sustainability constraints.

So is it possible to find an investment theme that combines growth with reasonable valuations? Can we find investments that will be attractive to both ESG and non-ESG supporters? The answer is YES, with companies involved in the much-touted energy transition.

A topic on which everyone agrees

This is a very cross-cutting theme, bringing together the main companies involved in the energy transition. It is not replicable through a specific index, which requires good active management. Let’s summarise the most important sub-themes that will be present over the next 30 years:

  • Solar panel manufacturing, for large-scale operations or small rooftop installations. These investments include solar panels, inverters and batteries to store excess energy.
  • Manufacture of wind turbines for onshore and offshore installations. In conjunction with these, rare earth metals and copper will be widely used.
  • Nuclear power: Although nuclear power has its detractors, the fact remains that it is a continuous source of energy that compensates for the intermittent nature of solar and wind power generation and emits no CO2. A new group of mini-reactors should be available for industrial use by the end of the decade, which will increase demand for uranium.
  • Electric vehicles and their value chain: car manufacturers, chargers, battery manufacturers, rare earth metal miners, copper miners.
  • Energy savings, thanks to the use of better insulating materials and electrical equipment that optimises the energy consumed in households and businesses.
  • Producers of hydrogen, which will be used to produce green steel, cement and ammonia. We need electrolysers and fuel cells. Hydrogen will also be used to produce ammonia for fertilisers and as fuel for ships.
  • Carbon sequestration. In cases where it will be impossible to do without CO2-emitting fuels, carbon sequestration techniques will have to be used.
  • Companies that invest more and more money in non-CO2 emitting energies, whether for new investments or to replace existing installations that pollute, will be favoured.

United we stand

This summer, the film “Oppenheimer” was one of the box-office hits. It shows how, when the scientific community works together towards a very specific goal, it manages to achieve it quickly. More recently, this was also the case with the “Warp Speed” project, which succeeded in obtaining 2 vaccines against Covid-19 in less than 9 months. Meeting the “energy transition” challenge will be possible thanks to the efforts of the global scientific community, supported by public and private investment.

In the meantime, we as investors have a wide range of themes and companies that make good investments at reasonable valuations and are capable of appealing to all groups of investors.

 

 

 

Past performance is not indicative of future results. The views, strategies and financial instruments described in this document may not be suitable for all investors. Opinions expressed are current opinions as of the date(s) appearing in this material only. References to market or composite indices, benchmarks or other measures of relative market performance over a specified period of time are provided for your information only. NS Partners provides no warranty and makes no representation of any kind whatsoever regarding the accuracy and completeness of any data, including financial market data, quotes, research notes or other financial instruments referred to in this document. This document does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. Any reference in this document to specific securities and issuers are for illustrative purposes only, and should not be interpreted as recommendations to purchase or sell those securities. References in this document to investment funds that have not been registered with the Finma cannot be distributed in or from Switzerland except to certain categories of eligible investors. Some of the entities of the NS Partners group or its clients may hold a position in the financial instruments of any issuer discussed herein, or act as advisor to any such issuer. Additional information is available on request.

© NS Partners Group

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