Oil and tech

On Friday we put out a small note looking at the 4th COVID wave, and in combination, the jawboning lower of oil prices by the White House and China.

A good little accompaniment is the below graph on tech vs energy sectors, and the COVID case rates.


COVID up, tech / energy wins, COVID down, energy outperforms tech. Pretty straightforward and intuitive, and guessing the COVID case rates is more or less impossible (outside of a DAA declaration like “COVID will be defeated by vaccines eventually”) so we stick to a valuation based story (tech expensive, energy cheap) and grit our teeth through the ups and downs. [there is a fundamentals story to go with it, about decreased capex, but it’s not really our point here].

We recently added ANN to our direct equity portfolios, which should help with some of the sentiment, if nothing else, to COVID beneficiaries (although in our note about ANN we labour the point that many of ANN’s business units were held back due to COVID, similarly many of their supply chains, which impact margins and working capital, in other words, mixed blessings perhaps).

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