Nic Norman-Smith (Lentus Asset Management), Clive Ramathibela-Smith (Clivera) and Chris Gilmour (Absa Wealth and Investment) all agree; Sasol is one of the best companies to invest in right now...
Lentus Asset Management Chief Investment Officer Nic Norman-Smith:
Oil is cheap and nobody, so it seems, wants to hold Sasol shares right now. After peaking at over R600 a share it now trades at around R397.
“I like it! It’s the market’s discomfort that’ll get you outsized returns,” says Norman-Smith.
Ask yourself what the market hasn’t: Will oil stay cheap forever?
“Almost nobody predicted the large, sudden drop in the oil price. Yet now everybody is certain that it’ll stay at $60 for the next 20 years!”
Nobody really knows what the oil price is going to do, but the reality is a lot of the extra supply that has come on the market, such as shale oil and the Canadian oil sands, is expensive to produce.
“Oil is not about to disappear!” says Norman-Smith. “The electric car won’t become ubiquitous overnight.”
One of the cheapest oil firms on Earth
Sasol is one of the cheapest oil companies in the world. “The crashing oil price has hurt the Sasol share price a lot more than many of the global supermajors (BP, Chevron, ExxonMobil, Shell, Total)."
If you believe humanity will still be consuming oil for a while then Sasol is one of the cheapest entry points into this vital commodity.
Listen to the audio for more detail on why Norman-Smith is buying Sasol.
Clivera Chief Investment Officer Clive Ramathibela-Smith:
Absa Wealth and Investment Analyst Chris Gilmour:
Goldman Sachs predicts the oil price will stay low for the foreseeable future. Why would anyone in their right mind invest in Sasol?
“I don’t agree with Goldman Sachs,” says Chris Gilmour, Analyst at Absa Wealth and Investment. “I think the oil price will bottom out a bit higher than they're predicting. And when that happens the rebound will be fairly swift. I’m not saying prices will recover to US$100 a barrel, or even US$80, but we’ll get back to US$65/US$70 without much difficulty.”
Gilmour points to a massive drop in oil exploration in the wake of the recent oil price crash and production levels that are already tapering off in higher cost areas. “It’s a self-correcting mechanism. If you go back to 2009; that rebound was very swift as well.
“When the oil price inevitably recovers; Sasol will represent extremely good value,” concludes Gilmour.
Listen to the Soundcloud clip for more detail from Gilmour.