Increasing Industry risk within the energy sector - sell AGL, Origin and Caltex hybrids

By David Bickford · 30 Nov 2014

By David Bickford ·
30 Nov 2014

Comments

When an industry's risk profile increases, as happened to traditional media when challenged by digital, it is best to get out of the sector and re-assess as needed, especially when investing in hybrids. Losses can be more painful to a fixed interest portfolio in comparison to an equity portfolio.

The energy sector is currently facing many issues, some cyclical but some also related to climate science. When industry risks increase just sell the sector, you don't need to come to too many specific conclusions Selling eliminates the problem, the risk. BR Securities recommend you sell AGL, Origin and Caltex hybrids.

AGL has exposure to coal fired power plants. Who knows the future of coal given climate science issues? Origin also has the extra exposure to LNG exports. Who knows the future price of oil given climate science issues? Can Caltex make a profit if oil prices fall further? Climate change may see accelerated growth in other sources of energy. Global policy initiatives to combat climate change are likely to be vigorous. You don't need to pinpoint the detail of what is going to happen to be a seller.

General advice only AFSL 456663. www.brsecuritiesaustralia.com.au

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Frequently Asked Questions about this Article…

Why is the energy sector considered high risk for investors right now?

The energy sector is facing increased risks due to both cyclical issues and climate science concerns. These factors make it a challenging environment for investors, as the future of coal, oil prices, and the shift towards alternative energy sources are uncertain.

What companies are recommended for selling in the energy sector?

BR Securities recommends selling AGL, Origin, and Caltex hybrids due to their exposure to coal-fired power plants, LNG exports, and fluctuating oil prices, which are all impacted by climate science issues.

How does climate change impact investments in the energy sector?

Climate change can lead to accelerated growth in alternative energy sources and vigorous global policy initiatives to combat its effects, which can negatively impact traditional energy companies reliant on coal and oil.

What is the risk of holding energy sector hybrids in a fixed interest portfolio?

Losses in the energy sector can be more painful for a fixed interest portfolio compared to an equity portfolio, making it riskier to hold hybrids in this sector amidst increasing industry risks.

Should investors sell their energy sector stocks immediately?

According to BR Securities, selling energy sector stocks like AGL, Origin, and Caltex can eliminate the risk associated with the sector's uncertain future due to climate science and market volatility.

What are the potential future challenges for AGL due to climate science?

AGL's exposure to coal-fired power plants poses a challenge as the future of coal is uncertain with ongoing climate science issues and the shift towards cleaner energy sources.

How might global policy initiatives affect the energy sector?

Global policy initiatives aimed at combating climate change are likely to be vigorous, potentially accelerating the growth of alternative energy sources and impacting traditional energy companies.

Why is it important to reassess investments in the energy sector?

Reassessing investments in the energy sector is crucial due to its increased risk profile from climate science concerns and market volatility, which can affect the profitability and stability of companies like AGL, Origin, and Caltex.