The Rise of Direct Lending and Asset-Backed Loans: Private Credit’s Growing Opportunity
August 4, 2025
The New Growth Regime: Why Private Markets Are Poised to Lead
August 15, 2025The Rise of Direct Lending and Asset-Backed Loans: Private Credit’s Growing Opportunity
August 4, 2025The New Growth Regime: Why Private Markets Are Poised to Lead
August 15, 2025Energy stocks: The best potential out there
07 August 2025
Electrification, AI and data centers have been the major drivers of increased electricity consumption particularly in the US. As such, the need to provide electricity while maintaining de-carbonization have been the key themes within the energy investor ecosystems. Traditional energy markets have overpriced recession risks and supply capacity is low.
Investment Rationale
Electricity has seen a global and unprecedent demand increase and ways to provide clean energy to supply the heavy needs of AI/ data center driven demand are far from readily available. This has placed Natural Gas and Nuclear electricity production at the forefront for providing electricity suppliers.
Uranium purchases remain firmly below replacement rate as utility companies are consuming more than they are able to purchase.
In addition, traditional energy markets like Oil and Gas have seen underlying support by China under $60 (WTI) and US production has stalled.
Valuation wise, many extremely robust and financially strong oil companies are trading at bargain prices and would be a great addition to investor portfolios.
a) The only sector to price a recession with global economy poised for upside surprise.
Energy demand forecast for 2026 have been overly bleak as result of past Chinese economic data weakness, consensus towards a global recession and Trump’s unstable tariff policies.
Generally speaking, economists dislike tariffs and have hence overpriced their impact on the global economy, leaving the door open to a rerating in case of upside surprise.
Economic data doesn’t suggest any impending recessionary pressure whether from the US, Europe or China.
Price wise, we have been in a supply deprecation range.
b) Very cheap on valuations
Typically, energy stocks make up for about 8% of the total S&P 500 market capitalisation vs today’s 3%.
Energy stocks are the cheapest looking at the total shareholder returns and many major oil companies, particularly in Nordic countries can be bought at 1 to 1.5x CFs.
c) Backwardation and over-sensitivity to any supply shocks
The oil market has remained in backwardation, essentially rewarding futures traders when collecting roll premiums. The higher cost for spot oil has discouraged storage which can be seen in the low EIA inventories. The US strategic reserve is also at historical troughs which could, in case of hightened geo-political tensions, bring the US back on the bid.
d) Peak output in the US, OPEC quota stabilisation and China Put.
As consistently reported by the EIA, the US production has reached a plateau.
US Rig count, a leading indicator for production, has been declining steadily.
Concerns about OPEC production increases have weighed on oil prices but have been overly exagerrated as exports have been stable for some time now.
Crude oil production and export volumes from OPEC have not seen any material increases and OPEC quota increases has not impacted these volumes.
China has been replenishing its’ reserves at any signs of dips, providing strong support to the markets around $60 (WTI).
strong support to the markets around $60 (WTI) Uranium purchases remain well below replacement rate as utilities are consuming more uranium than they are purchasing.
Recommendations and Trade Ideas
Oil & Gas
-
Var Energi ASA (VAR.OL)
Positive production growth potential and Great DY (14.5% for FY25E/FY26E)
-
Harbour Energy (HBR.L)
Portfolio expansion and Capex reallocation outside UK, strong DY (9.8%) and potential buybacks
-
Devon Energy Corp. (DVN)
Meaningful FCF generation, focus on return of capital to shareholders
Uranium
-
Cameco Corp. (CCJ)
Strong results confirming management’s execution ability, low cost inventory and demand outpacing production in the medium term.
-
SPROTT Inc (SII)
Will benefit as large investors increase shares in the sector, sanitized exposure to Kazatomprom.
Conclusion and Risks
A broad based allocation to energy markets seem to provide a very interesting assymetric risk-return potential.
Exagerated economic and supply concerns, low inventories, demand drivers and compelling valuations contribute in making this space a great consideration for any portfolio.
However, tail risks must be carefully managed:
-
Slow down or recessionary risks to the global economy.
-
Faster than expected recovery in spare capacity and replenishment of reserves.
-
Normalization of Russia/ Iran situation adding spare capacity to the oil markets.
-
Slower than expected demand ramp-up in Natural Gas.
-
Overbought Uranium markets causing a short term correction.
-
US weak activity data.
Sources:
-
Morgan Stanley – 3 Themes Shaping Energy Strategy
🔗https://www.morganstanley.com/insights/articles/energy-transition-trends-sustainability-leadership-summit -
StoneX Intelligent Quant (Vincent Deluard)
🔗https://thefelderreport.com/wp-content/uploads/2025/05/IQ_0525.pdf -
CME Group – Crude Oil futures
🔗https://www.cmegroup.com/markets/energy/crude-oil/light-sweet-crude.quotes.html -
Christopher Yates – The Energy Bull Market Is Only A Matter Of Time
🔗https://seekingalpha.com/article/4793952-energy-bull-case-remains-intact -
OPEC Monthly Oil Report
🔗https://momr.opec.org/pdf-download/ -
EIA- OPEC Revenue Factsheet
🔗https://www.eia.gov/international/analysis/special-topics/OPEC_Revenues_Fact_Sheet
About Stewards Investment Capital
Stewards Investment Capital is a boutique investment advisory firm with a track record of over 25 years under the Stewards Group of Financial Companies. Strategically positioned in Mauritius, South Africa, and the USA, we tailor niche investment solutions to high-net-worth individuals and institutional investors.
Guided by a high-alpha approach and fuelled by a passion to be a catalyst for growth, our commitment to our investors is rooted in our mission to grow and nurture their wealth, building lasting fortunes and creating enduring legacies to achieve real freedom. This endeavour is powered by our team of passionate investment professionals, each contributing decades of experience and expertise to our firm.
For further information about Stewards Investment Capital, please visit stewardsinvestment.com/
For more information please contact:
Suneeta Motala
Chief Marketing Officer
Forbes Communication Council Member
Email: suneetamotala@stewards.global, thestewards@stewards.global
T: (+230) 466 7533
