Blue Whale reveals first investment in energy sector

Popular investment fund Blue Whale has added Canadian Natural Resources to its portfolio, marking the first time it has entered the energy sector.

Blue Whale Growth Fund, which is backed by Peter Hargreaves, has seen its performance suffer in recent times as higher interest rates dented investors’ appetite for growth stocks.

The fund was down 27.6 per cent over 2022, underperforming the IA Global sector average loss of 11.1 per cent.

The energy investment marks a shift in tactics after Blue Whale sold positions in US tech star names over the past year. 

Last summer, the fund ditched longstanding holdings in US tech stocks because of concerns over higher interest rates and soaring inflation.

It sold its position in Google’s parent company Alphabet, as well as holdings in Amazon and Meta, and no longer holds any so-called Faang stocks.

Last month Blue Whale’s factsheet showed a 4.1 per cent allocation to the energy sector but the fund remained quiet on where it had invested.

Today it announced it had added oil company Canadian Natural Resources, which it said has ‘levels of quality and structural growth drivers’ in ‘abundance’.

Like most companies in the energy sector, Canadian Natural has performed well and is up nearly 24 per cent over the past year.

While the company has been on the fund’s radar for some time, fund manager Stephen Yiu said he had been cautious of investing in energy generally.

Now the sector become ‘far more appealing’ and is likely to ‘take a greater share of the global GDP over the medium to long term’.

Yiu said: ‘The company itself owns some of the highest quality oil assets in the world – the crown jewel of which are its oil sands mines in Alberta, Canada.

‘What makes these mines so important is that their reserves are predicted to last approximately 45 years – extremely favourable when compared to the average US shale company reserves of around 10 years.’

With oil prices currently above $75 a barrel and Canadian Natural’s breakeven point at $30 per barrel, and minimal capital expenditure it’s likely to have a healthy margin.

‘This compares favourably to conventional oil assets with around 10 per cent per annum decline and as much as 40 per cent per annum for US shale oil.’

He believes that oil prices are likely to stay at a high level for some time because of supply challenges in the US, Saudi Arabia and Russia.

He pointed to Saudi Arabia, and OPEC as a whole, missing production quotas which showed ‘spare capacity’ is close to being exhausted.

‘Coupled with worsening US relations, this is likely to bias OPEC towards limited supply growth.

‘With the key oil-producing nations suffering for one reason or another, Canada has an ace up its sleeve in the form of its ESG credentials.

‘Whilst the discussion of ESG may seem laughable when discussing producers of fossil fuels, a more socially and environmentally-aware end consumer will be more comfortable in their consumption of natural resources if the company can demonstrate initiatives to limit its impact on the environment and improve its social credentials.’