Heavy investment in solar sector
The resource sector continues to be under pressure from a strong US dollar, rising long-term interest rates, growing oversupply and excess capacity which is taking its toll on the explorers and producers in the resource sector.
The oilfield services we have selected have a higher yield than bonds with significant potential to grow dividends year-after-year and we believe they are under appreciated by those in search of yield.
For more significant growth potential, however, we intend to invest more heavily into the solar sector with the remainder of our cash balance.
We believe the solar sector has the highest growth potential in the US, benefiting from significant cost reductions, making the technology profitable in its own right without reliance on government subsidies. As a “green” energy, it should continue to be a politically favored industry.
US President Obama would like to double renewable electricity generation by 2020. This could be beneficial for nuclear energy, which does not have carbon emissions, but the prime beneficiary should be solar energy, the cheapest form of renewable energy to install and maintain.
At some point we can see hard assets returning to favor once again thanks to either the potential for the unprecedented monetary stimulus that the US Fed has been feeding into the market or global economic growth rebounding on its own.
Until either of these events occurs we will remain heavily weighted towards those sectors peripheral to the resource sector and in alternative energy. Our fund is approximately 50% in cash and we are excited about continuing to turn the corner and begin to achieve our objective of outsized returns. The resource sector continues to be under pressure from a strong US dollar, rising long-term interest rates, growing oversupply and excess capacity which is taking its toll on the explorers and producers in the resource sector.
Rising interest rates due to either a growing US economy and/or the potential for the US Fed to reduce QE purchases next year has triggered a bear market for bonds, increasing the appeal of US equities.
By Rodney Stevens, Fund Manager
