An Australian fund manager has advised investors to consider energy stocks of companies situated outside of Russia due to its military conflict with Ukraine and has identified three local stocks it believes will reward investors in the current geopolitical environment.
“Although Western sanctions have been oriented specifically towards maintaining the continuity of supply for critical goods, however, we have seen a strong ‘self-sanctioning’ effect amongst traditional customers of Russia. For instance, a commodity trading house may struggle to obtain the requisite insurance and finance to cover the purchase and transport of a shipment of Russian-origin commodities,” Datt Capital founder and chief investment officer Daniel Datt noted.
“As such, almost overnight, we have seen an enormous uplift in demand for commodities of non-Russian origin to fill this sudden supply gap.
“These circumstances have thrown up unique opportunities for Australian-focused investors to capitalise upon.”
Following on from this analysis, Datt Capital has nominated Whitehaven Coal (WHC), Woodside Petroleum and Santos (STO) as three companies investors should be looking to include in their portfolios right now.
“Whitehaven Coal produces high-quality thermal coal in NSW for export primarily to Japanese and Korean customers. Russia coal imports supply an estimated 15 to 20 per cent of Japanese and Korean coal demand. Consequently, WHC’s customers will likely be willing to increase purchase volumes from Whitehaven at higher prices than has been traditionally achievable,” the fund manager said.
It noted WHC is even more attractive for investors due to the commencement of a $400 million share buyback where it is likely to purchase up to 10 per cent of the company’s capital on market.
“The debt-free balance sheet and high-quality assets make this a compelling value proposition at a market cap of less than $4 billion,” it said.
With regard to Woodside Petroleum, it regards the strengthening of its oil and gas (O&G) operations as a real benefit to investors.
“Woodside Petroleum has recently merged, subject to completion, with BHP’s petroleum division and will be a global top 10 oil and gas company in its own right. It is heavily exposed to the liquid natural gas markets, primarily exporting to Asia,” it stated.
“Accordingly, we see Woodside Petroleum as possessing strong leverage to higher O&G prices going forward whilst also paying an attractive dividend yield.”
Finally, Datt Capital has nominated Santos as a good company in which to invest right now due mainly to its O&G assets located in Australia and Papua New Guinea.
“Accordingly, there is a strong opportunity to capture materially higher prices given the current market conditions. We also expect that STO will reduce its stake in certain development assets which provide the potential for future capital returns along with its regular dividend,” it said.''