It has been notable that during this period of market strength two economically sensitive sectors (oil and mining) have failed to catch the upbeat mood.
This is disconcerting, particularly as industrials have been strong. Could the crowd be right in betting that commodity prices have further to fall? With this in mind, we have had two interesting meetings recently.
The first was with existing holding, Hunting, the oil services company. The outlook for the onshore US rig count is lacklustre but the company is beginning to export its know-how around the world.
To achieve this growth, the company is likely to need to invest more than currently expected. The intellectual property of Hunting’s product range is less than, perhaps, generally perceived. Catalysts for share price outperformance appear to have been pushed out and we have sold the shares.
We participated in the esure Group stockmarket flotation. Chairman Peter Wood has a strong track record building successful insurance businesses. The company offers car insurance through the esure and Sheilas’ Wheels brands. esure Group has low operating costs and much of its distribution is via internet price comparison websites.
The company owns 50 per cent of Gocompare, and is looking to grow its home insurance and insurance broker offerings. Importantly for us, Peter Wood will continue to hold more than 30 per cent of the company.
Hector Kilpatrick is chief investment officer at Cornelian
