Oil investment: what would Jean Paul Getty do?

Well, he probably would’ve been pretty keen on a long-term supply of oil for less than $2 a barrel. James Ferguson looks at the stocks Getty would be buying were he around today.

Legendary US oilman Jean Paul Getty was a wildcatter in Texas. However, after the 1929 Wall Street crash he worked out that it was cheaper to buy oil in the ground that had already been found (and was owned by listed oil firms) than it was to take the risk and expense of prospecting for it. A man with a keen eye for value, Getty made himself very rich during the 30s buying oil reserves via the stock exchange. And were he alive today, he would undoubtedly be at it again.

The proliferation of easy credit worldwide has fuelled a boom in private equity that has seen countless small and mid-sized listed firms taken private. This has pushed mid-cap valuations significantly above those of mega-cap stocks, leaving some global mega caps on outstandingly low ratings. Often, this has meant that large, high-yielding, blue-chip stocks are trading below where they were seven years ago, even when some have more than doubled earnings since then.

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James Ferguson qualified with an MA (Hons) in economics from Edinburgh University in 1985. For the last 21 years he has had a high-powered career in institutional stock broking, specialising in equities, working for Nomura, Robert Fleming, SBC Warburg, Dresdner Kleinwort Wasserstein and Mitsubishi Securities.