Report by CHA-AM Advisors

In the latest edition of David Scott’s A Strategist’s Diary, he argues that the jet-fuel panic has become an “ex-crisis”, with investors too quick to extrapolate higher fuel prices into a broader inflation problem. Instead, he sees demand destruction, airline fare discounting and rising supply from the US and China as evidence that the shock is already mean reverting. The investment implication is contrarian: sectors he would normally avoid, including airlines and state-owned Chinese oil/refining names, now offer compelling valuations. David highlights PetroChina and CNOOC as surprisingly well-run and still cheap despite strong prior returns, while also finding opportunities across global airlines including Spring Airlines, Delta, Ryanair, Eva Airways, IAG and IndiGo.

Energy

Report by Copley Fund Research

EM Fund ownership surges to highest levels on record - of the 371 funds in Copley’s analysis, 53 increased weights in the oil giant and 10 opened new exposure in the last 6 months. ARAMCO has overtaken both China Petroleum & Chemical and PetroChina in recent months to move to the 5th most widely held stock in the sector. In Saudi Arabia, ARAMCO has overtaken both Al Rajhi Bank and Saudi National Bank over the course of 2023 to become the most widely held stock in the country; no other company has more funds positioned overweight. A stock once shunned by EM managers is seeing a definitive change in sentiment.