The £735m LF Blue Whale Growth fund has invested in energy firm Canadian Natural Resources as it expands its holdings into the energy sector.
The oil producer was pinpointed by the fund as well-placed to deliver outperformance due to issues affecting the traditional big three oil suppliers – Russia, the US and Saudi Arabia.
The decision to comment on the latest addition to the fund is an unusual step. CIO and fund manager Stephen Yiu said: “Whilst we tend not to discuss investee companies outside of the Top 10, many people have noticed a new sector appearing on our factsheet in the last few months – energy.”
According to Blue Whale’s latest factsheet, 4.1% of the fund is now invested in the energy sector.
Yiu added: “When we invest in a company, we look for both the highest levels of quality and structural growth drivers that should assist in our mission to deliver outperformance over the long term. We consider that Canadian Natural Resources delivers on both in abundance.”
Explaining the reasoning behind the stock pick, the fund described the oil sands mines in Alberta as one of the “highest quality oil assets in the world”. The mines have reserves that are predicted to last 45 years, compared to US shale company reserves which average 10 years.
The breakeven point for Canadian Natural Resources is $30 per barrel due to its low production costs, which weighs up favourably when factoring in the current price of roughly $75 per barrel.
Yiu also pointed to supply issues and political tensions currently affecting Russia, the US, and Saudi Arabia. In comparison, Canada is relatively unaffected, while the country’s ESG record stacks up favourably against competitors.
“Among the top oil exporting nations, Canada offers the highest aggregate ESG score, whilst Canadian Natural Resources itself employs several initiatives and measures in recognition of its ESG responsibilities – ranging from reduction in freshwater usage and land reclamation, to workplace safety and inclusion.
“While the discussion of ESG may seem laughable when discussing producers of fossil fuels, a more socially- and environmentally-aware end consumer will be more comfortable in their consumption of natural resources if the company can demonstrate initiatives to limit its impact on the environment and improve its social credentials.”
In 2022, the fund underperformed its IA global average benchmark by 16.5%, down 27.6% overall for the year. However, the fund has outperformed its benchmark by 12.9% since launching in 2017.