The Energy Transition Portfolio: April Issue of

Slide1Each issue of contains: a Main Essay, a Model Portfolio, a Data Brief, and a link to a Downloadable Podcast. Gregor Macdonald, Editor.

Readers may purchase each issue individually, through Purchase.

Or, readers may also take a 12 month subscription through Monthly eBook  Annual Subscription.

This month’s issue concentrates on the model portfolio, published and updated once a month in every issue, and which has just completed its first year. This is an all ETF portfolio, and employs an allocation strategy, concentrating in the energy sector. While it’s satisfying to see the portfolio up +11%, in this month’s issue we take a look at the next ten years, and how the portfolio might change were it to run to the year 2025. In other words, what if the model portfolio were to become a longer running, Energy Transition Portfolio? (We also look at two companies within selected ETFs, Quanta Services and Solar City).

One of the biggest surprises of the past five years has been the ability of renewables—especially solar—to successfully exploit the domain of sluggish, meandering global growth. To understand how this can be is to understand the unique conditions particular to our current energy transition: we live in a time of low interest rates, and, high overall prices for energy from all sources. These twin realities have come together and they’ve produced counterintuitive results. Global demand for energy is growing again, but, almost entirely through the powergrid. Moreover, the bulk of economic activity we detect in global GDP is also transitional, in nature. At, we advocate a thesis of energy transition as a rather unique phase in capitalist history. With cherished beliefs upended, the question remains: how can investors locate discrete pockets of high growth during this time, and for the next decade? This month, we consider the likelihood that the model portfolio combines the correct themes and timelines, as energy transition enters its second decade, and its likely resolution by the year 2025.

The Model Portfolio, which began April 1, 2013, is also anticipating the coming shoulder season in the energy complex. Accordingly, we will make significant changes to the model portfolio this month.

Following the concept of the portfolio’s two, separate timelines, we have now completed our work in the first year to construct the portfolio’s rough outline. Now comes the more typical Springtime seasonality when oil and natural gas prices tend to weaken. Readers are aware of course that natural gas prices have already weakened greatly. That’s not a surprise. over the Winter was, and has remained, adamant that those short-lived price spikes were 1. not sustainable, and 2. not the sign of the next repricing cycle. 

That said, notice that the model portfolio is now adding the FCG: First Trust ISERevere Natural Gas Index ETF to the list of investible ETFs. We will not take a position in that ETF just yet, and will likely wait until either 1. a major correction in stocks gets underway or 2. we are closer to 2015. But given the view that natural gas, through the globalized LNG market unfolding later this decade, is due to become a major input to global powergrid growth, it’s inevitable the portfolio will need a direct position in natural gas.

“ eBook – The Energy Transition Portfolio – April 2014” by Gregor Macdonald – Editor on Ganxy