By Barry Schwartz
As of last week, we have now reduced our client’s weighting in energy producers to zero.
Here’s what we know. We know that with the price of oil at these levels, our favourite energy names (Suncor and Canadian Natural Resources) aren’t covering their capital budgets and dividend payments. As a result of the dramatic drop in the price of oil, many energy producers will need to borrow a lot of money to fund their current operations.
Here’s what we don’t know. We have no idea where the price of oil is heading. Investing in commodity producers has been a rough ride for many investors. Even if these companies have the smartest managers, best assets and lowest costs, they are price takers and have no other option but to accept the price that the commodity demands. We have no intention of sticking around and waiting for the mess to get cleaned up.