Top Performing Norway Fund Finds Refuge in Fish Amid Oil Crash

  • Alfred Berg Gambak still waiting for oil services reversal
  • Says `lot of losses' priced in at Norwegian bank DNB

A sure fire way to beat Norway’s benchmark index is to stay away from its oil stocks.

That paid off for the Alfred Berg Gambak fund, which returned 19.6 percent in 2015, 12.9 percentage points more than its reference index.

The managers of the fund were prescient in 2014, selling off most their energy holdings as the price of crude started to plunge. The once dominant energy sector in Norway, western Europe’s biggest oil producer, is now a shadow of its former self on the bourse as companies such as Seadrill Ltd. have slumped more than 90 percent from their peaks.

The fund doesn’t even hold Statoil ASA, the country’s biggest company and largest oil producer. Instead it has loaded up on fishing companies such as Bakkafrost P/F, Leroy Seafood Group ASA and Marine Harvest ASA, the fund’s biggest holding. In the past year, it also snapped up companies such as Tomra Systems ASA, Veidekke ASA and Multiconsult ASA, anticipating a wave of stimulus from the government to counter the oil crash.

“Money will be spent on infrastructure in Norway,” Petter Tusvik, one of the managers at the fund, said in an interview on Monday. “It’s a case that when times are a bit more difficult in Norway then there will be investments.”

He and his two partners, Leif Eriksrod and Stig Arild Syrdal, manage in total about 6 billion kroner ($700 million) and pick stocks based on valuation and “sentiment.” Their Alfred Berg Norge Classic Fund, which is more valuation-based and closer to index, returned 12.3 percent in 2015. Sentiment are factors that the company can’t affect such as analyst recommendations, capital flows and technical analysis. That method helps the Gambak fund to avoid losers and “getting stuck in the valuation trap,” Tusvik said.

And that trap is still alive and well in the oil business, according to the managers.

“We haven’t really seen a big reversal yet,” Tusvik said. The industry will need to go through a restructuring, especially within rig and supply companies.

“There will be more shares, most of them must issue.” he said. “When that restructuring is over we may be ready to buy shares.”

The fund has bought oil producer, Det Norske Oljeselskap ASA, in the past six months. The oil producers are “the most safe” if one is entering the energy sector, Eriksrod, senior portfolio manager, said.

The Norwegian producer is a good bet since it owns a big chunk of the giant Johan Sverdrup field, which is now being developed.

“It’s so long until Sverdrup is in production so it’s probable that the oil price is much higher then,” he said. “In addition, the project is getting much cheaper because costs have fallen so much.”

Buying DNB

Of the bigger Norwegian companies, the fund holds Yara International ASA and DNB ASA. The Norwegian bank is “cheap but the sentiment is bad” because foreigners are selling, according to the managers.

“A lot of losses are priced in,” Tusvik said. “There will be losses, that’s clear. But not as much as the foreigners fear. We think the banks have learned from the shipping crisis and are better equipped today.”

The daily discussion is now focused on whether the oil price and energy stocks have hit bottom, and the danger that could entail.

“The risk with our portfolio is the underweight in oil and the overweight on the currency play,” Tusvik said. “If the oil price reverse we are underweight oil and the krone will probably strengthen -- that’s a double whammy.”

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