Michelle McGrade, chief investment officer (CIO) of TD Direct Investing, tells Proactive Investors that the chances of the squabble-prone Opec states sticking to this week’s landmark agreement to cut production are good.
It is Opec’s first output cut in eight years, and McGrade believes that even these oil-rich countries are starting to feel the pinch, and they need the price of oil to go up.
McGrade also gives an insight to how retail investors are responding to the news, “as they pile into a range of stocks” – and it’s not just the old stand-by favourites BP and Shell; McGrade also name checks Tullow and Premier Oil from the mid-cap section of the market.
“You can buy the BPs and the Shells; they have good dividends, and if the oil price does go up to around US$70 a barrel, which is what Opec is indicating is what it would like, then the dividend would hold well for those companies,” McGrade opined.
“The other way to play it [the oil price rally] is to buy a fund, so one of the funds on our recommended list is specially orientated just to energy, and it’s called Guinness Energy Fund. They’ve got about 30 stocks within that fund,” TD’s CIO said.
She thinks the energy-focused fund managers are looking at a thirty to forty per cent rise in oil stocks over the next couple of years.