Artemis fund builds fracking exposure
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The Artemis Global Select fund has added to holdings in companies expected to benefit from the rise of “fracking” in America as it builds on the newest theme in its portfolio.
The fund, managed by Simon Edelsten, Alex Illingworth and Rosanna Burcheri, has taken a 1.5% stake in Shin-Etsu Chemical, a Tokyo-based company that is America’s largest PVC manufacturer.
The stock is a play on the portfolio’s “gas glut” theme, which invests in companies benefiting from the cheap supply of gas that will follow an expansion in fracking – extracting gas from shale rocks – in America.
Companies such as Shin-Etsu Chemical see lower input costs as shale gas offer businesses with a cheap and plentiful hydrocarbon. Meanwhile, the company is poised to profit from any upturn in the American economy as it supplies the housebuilding industry with PVC materials such as drainpipes and guttering. (article continues below)
“If you gave a Dow Chemicals expert running an American fund the reported accounts of Shin-Etsu Chemical, they’d buy the whole company – they’d think they’ve never seen anything so cheap in their life,” says Edelsten.
Edelsten sees the rise of fracking as having “significant importance” to equity values on a 10-year view, as the increased use of shale gas could lead to numerous benefits for theAmerican economy – including cheaper electricity and transport fuel as well as lower input costs. “We think this is a very important story but little understood by the stockmarket at the moment,” he adds.
Holdings in the gas glut theme, which was introduced into the fund last November and account for about 11% of the portfolio, include the manufacturer 3M, which gains cost savings in the same way as Shin-Etsu Chemical.
Flowserve, a pump and valve maker, and Chart Industries, a cryogenic equipment supplier, are “picks and shovels” plays on the rise of fracking, while Comerica Bank will benefit from loan growth connected to such projects, Edelsten says.
Rail network Union Pacific, barge operator Kirby and international transport company CSX are holdings intended to capitalise on changes linked to the increased supply of shale gas.
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