Technology opens new doors in the oil sector

Picking a specific route to gain exposure to the oil industry has paid off for Franklin Templeton global equity manager Don Huber.

The technological and infrastructure advancements required for the continued exploitation of dwindling oil reserves has been the focus for his fund’s energy holdings.

Huber runs the Franklin Global Growth fund as well as the Franklin Templeton Global Growth and Value fund. For the Global Growth portfolio his three energy holdings were among his best performing stocks in 2009. The companies, which include Australian-based Worley Parsons and Italian run Saipem, offer sophisticated technology to the oil and gas industry in areas such as deep water oil exploration and production.

He believes the stocks offer attractive leverage and have sound growth models which make for good investment strategies. ‘The new technology being created by these companies allows for new production methods to be used,’ says Huber. ‘For example, in the Canadian oil sands, they have helped excavate as of yet untapped oil reserves.’

‘We thought the sell-off of stock in the oil industry was overdone in 2008 and we then saw a rise the following year. The oil price rebounded and many investors realised that activity would pick-up in the long term.’

The fund also has positions in the Chinese market, albeit focused more on the retail sector, and one its best performing stocks is the Chinese retail production company Li Fung. Huber has high hopes for it in the long term as the retailer has recently entered a joint venture with American retail behemoth Wal-Mart to produce goods sold under its proprietary brands.

‘We recognise there is strong growth coming from China and we would look very closely at another name if we had got an idea of another driving force behind the Chinese consumer market.

‘In the long term I think it’s still got strong secular growth.’

Over the past five years has Huber has returned 18.8% through the Franklin Global Growth Fund while its benchmark, the MSCI AC World Growth TR USD, rose 12.9%.