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  • David Cole

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    As a managing director of Newport Private Wealth, David Cole focuses on providing individuals and families with investment and wealth management services. He has nearly 20 years experience as a portfolio manager and investment counselor.

    Since 1992, David has been involved in the start-up and growth of asset management companies. From 1992 to 2003, he was a principal and partner in a boutique investment counselor firm, which grew from $25 million to over $400 million in assets under management. In 2000, David also provided start-up capital and strategic advice to Timbercreek Asset Management, a multi-family residential and mortgage management company, which has grown to over $1.5 billion in assets. David currently sits on the advisory committee of a 5000+ unit Timbercreek apartment portfolio.

    David attained his BA in Economics from Wilfred Laurier University in 1992 and his CFA designation in 1998.

    David can be reached by email at dcole@newportprivatewealth.ca.



    Why the deep freeze is good for your portfolio

    car in the snow21 150x150 Why the deep freeze is good for your portfolioApart from the Olympics, the most popular shared experience these days is talk about the weather. To be specific, the bitter cold that has hit most of Canada – and given rise to the new and now popular term, ‘polar vortex.’ However, there is a silver lining to these snow-filled clouds – and not just for those who enjoy winter sports.

    Demand for natural gas has risen appreciably with the decline in temperatures. And that’s good for investors like ourselves who took a contrary view back in 2011 when the commodity was deeply out of favour. At the time, in North America, natural gas was trading at approximately $1.80 per one million British Thermal Units (BTUs) and producers’ stock prices were depressed.

    But for investors who took a longer-term view, a different picture was emerging. One that held the potential for significant profit.

    That’s because natural gas enjoys attractive qualities as a clean, abundant and (relative to alternatives) cheap form of energy. In recent years, technological advancements and readiness of supply have increased its application for power generation, industrial use, transportation, drilling rigs, etc. In fact in 2013 and 2014 there are more than 350 projects completed or underway in North America that will create demand for more than 1 trillion cubic feet of supply per year.

    The wide and cheap availability of natural gas in North America has led to a mini-manufacturing boom or ‘re-shoring’ of manufacturing facilities back to the U.S. That’s because, unlike oil which is subject to global pricing, natural gas prices have regional differences. In Europe, for example, natural gas trades at approximately $11 per one million BTUs, and $16 in Asia.

    Not surprisingly, industry is moving to fill this void. In 2015, the U.S. will begin exporting LNG (liquefied natural gas) to Asia and Canada will have its program underway by 2017. The LNG export projects approved amount to 25% of annual supply in North America. It’s logical to expect increased demand and reduced supply will have a positive effect on pricing.

    It’s already being played out – with prices having moved up to their current level of $5 in North America. Many in the gas industry claim that to recover all the costs of buying land, drilling, building production facilities, etc. the industry needs a $5+ gas price. Clearly with gas in the $3 to $4 range over the past two years the number of rigs drilling for gas in the U.S. has remained depressed (down 60% from the peak). Industry has not yet allocated additional capital to drill more wells. We will see if the now $5 gas price leads to increased drilling in the year to come.

    Our approach since 2011 has been to overweight natural gas investments in our Newport North American Equity Fund, with our largest holding being Tourmaline (TSX:TOU), also the subject of previous blogs. Tourmaline has grown its gas production 50% a year for six straight years. Its share price has risen over this time reflecting this growth. To date, our thesis has played out as we had hoped and we believe there are a number of years of strong growth to come – albeit with likely some volatility along the way and we manage for that with a diversified portfolio of stable investments.

     

    When will natural gas prices turn?

    Record warm temperatures made for a comfortable Canadian winter this year. But they’ve caused a chill in the energy market. Particularly natural gas prices which dropped to a 15 year low.

    What’s the cure?

    “Low gas prices” is the standard response from industry experts. Low prices spur demand and cut off supply. It’s just a lesson in economics.

    [read more >>]