Three stocks to protect your portfolio from the energy shock

Professional investor Chris Clothier of the Capital Gearing Trust picks three stocks to buy for inflationary times.

The Organisation of Arab Petroleum Exporting Countries – a regional cousin of oil cartel Opec – discovered its tremendous pricing power in oil markets after the Yom Kippur War in 1973. That realisation, among other factors, helped usher in the stagflation of the 1970s and a lost decade for investors. In the latter half of 2021, we became concerned that Vladimir Putin had reached the same conclusion regarding natural gas in Europe. Prior to the invasion of Ukraine, Russia supplied 40% of Europe’s gas, and a higher gas price would mean higher European electricity prices and higher inflation.

A dearth of oil and natural gas exploration in recent years has exacerbated the issue. Similarly, the transition to a low carbon economy will be inflationary as productive energy capacity is taken offline and replaced with new renewable energy sources. The tragic events unfolding in Ukraine have reinforced these trends. These considerations helped inform our portfolio positioning as we came into 2022.

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Chris Clothier

Chris Clothier is co-manager of the Capital Gearing Trust.