“Everybody has been fixated on the oil price going down and that being somehow bad, but it isn’t,” Lang said. “It is only bad if your economy is based on producing the stuff and most are not. For non-oil countries it just represents a shift in the economy so all the companies which service the oil industry are finding it harder, but there is a tendency to focus too much on them.”
“It is a game with winners and losers, not just an overall loss for everyone,” he added. “The winners are us as consumers so we have shifted out of capital goods and moved into domestic facing companies.”
Royal Mail is a prime example of Lang trying to tap into this. Ardevora recently bought into the company at a time when many have been shunning the stock.
“When I think about taking a new long I look at whether the management approach is appropriate for the environment they are working in,” Lang explained. “I think most risk in this area comes from managements being in denial. Then secondly I consider how everybody else is behaving.”
“With Royal Mail, I see a business that is not trying to grow, it is actually shrinking in a controlled way,” he continued. “The management is reshuffling assets and is aware of the surplus capacity in the industry. In that sense they fit the environment they are working within, so that is great. They can shrink and become more profitable.”
Another aspect of the oil slump Ardevora has been seeking to play is sovereign wealth funds selling off assets to counterbalance the lower oil revenues they are taking in. This is potentially creating a price fall in some assets which is unrelated to their fundamental merits.
