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“You want to do the opposite to what you do in the
housing market: when you are looking for a house, you
don’t want the best one on the street”
The best house on the street
If you are going to gamble on
bombed-out industries, Coombs says
it is a good idea to swerve the hardesthit
stocks within those sub-sectors.
“You want to do the opposite to what
you do in the housing market: when
you are looking for a house, you don’t
want the best one on the street,” he
continues. “In a deep recession, you
want to buy the strongest player in
those awful sectors. That’s the way
to go because they will gain market
share as those around them fail.”
As a result, Coombs has bought BP,
Shell and Total in the oil & gas sector,
pointing out they have the strongest
balance sheets and their debt is rated
as investment grade. He admits the
sector doesn’t have the best long-term
growth story, however, a view shared
by Wayne Berry, investment manager
at Brewin Dolphin.
“Oil could see a recovery in the
short to medium term, but the
decarbonisation of the economy
means it is a less viable long-term
option,” he says. “Another issue is the
pricing power of oil companies is
largely decided for them by
OPEC, so this makes it less
attractive over a 10-year
time frame.”
This highlights another
problem with many of
the sectors hardest hit by
the shutdown – the likes
of physical retail and oil &
gas already looked structurally
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