By Lauretta “Retz” Reeves, CFA
Despite the market turmoil, on Monday, August 24th, I boarded a plane from Miami headed to San Francisco and a round table discussion hosted by the Swiss specialty chemical company, Clariant. I have found it is always better to focus on company and industry fundamentals than allow myself to be tossed around by the waves of market volatility, and this was an excellent opportunity to do so.
Since being spun off from Sandoz (now the generic arm of Novartis, a Frigate Folio holding), Clariant has undergone significant portfolio restructuring and now is focused on Care Chemicals, Catalyzers, Natural Resources and Mining and Plastics and Coatings. Clariant highlighted in this conference challenges and trends in its North America market with a particular focus on growth drivers in its global catalyst and oil business. In addition, they brought in experts from IHS Chemical, Dow Chemical, Technip and ADM to discuss the evolution of the chemical industry with an emphasis on the importance of petrochemicals (as a feedstock and source of energy), strides in innovation and technology, regional global changes and differences in energy sources and “Chemurgy.”
According to TheFreeDictionary, “Chemurgy is the development of new industrial chemical products from organic raw materials, especially from those of organic origin.” Chemurgy highlights another focus of this conference – the need to provide sustainable solutions for providing and utilizing energy.
In light of the recent volatility in the oil price the outlook for “energy” is forefront of investors’ minds. Of course, there are competing sources of energy – oil, gas, coal, sun and wind and new technologies that can make the acquisition and use of energy more efficient, such as seismic advances, deep water technologies, shale access and chemicals catalysts. Layering on regional access and needs , as I interpreted from presentations at this conference, estimating what the exact “price” of a “source” of energy should be at any future spot in time is pretty impossible; but I did interpret from this conference that as the global population grows, new emerging markets evolve and some current sources are depleted, the need to find new sources will continue grow.
My attendance at this round table supported IIM’s thesis that energy prices, in particular oil, are below their long-term normal level, but with all the moving parts likely will be volatile. With proper due diligence, volatility can be an opportunity which is what we believe exists in this sector now. Attending this conference also reinforced for me what I love about this profession, the opportunity to find, research and invest in new technologies and companies that are changing our world, which is much more rewarding than watching markets sway.
It is possible that some of the companies mentioned in this note may be held in the independent portion of your account or are currently held in or under review for our Folios – if it’s the latter, I do or may own them, too. The status of these holdings may change without notice. Please feel free to contact me, however, if you want to talk about my observations from this conference or or our holdings. In the meantime, thank you for investing along side of your IIM portfolio managers.