What to do with ORG shares?
Origin Energy Ltd [ASX:ORG] is an energy producer…and that is enough said.
ORG is all about energy price and that has been one of the worst places to be in the past 12 months. If you held onto your ORG, your fate would have been quite similar to BHP investors today. And that is because commodity prices move together, oil and iron ore.
Why did energy price collapse? Because there was a softening from the demand side, which is China; coupled with oversupply on the supply side, which is North America, OPEC and other energy exporters.
We are in a bottoming process right now. I called this bottom some time ago and I believed we would be stuck at the bottom for some months.
That has happened. We have tested lows and we are still at a bottom today, we are still going through that bottoming process.
The demand side is largely fine and the supply side is the problem. So a ‘softer’ stance from OPEC is obviously critical to pricing. In the meantime, geopolitical risks can also offer some help to pricing.
I was predicting a rebound to US$70 early in the year, then dropped my forecast to around US$50. I also revised down my long term outlook for oil price.
I believe we are still going to recapture US$100 in the coming years, mainly due to rising demand and supply side rationing.
Of course, that also means I don’t believe an energy revolution has come to the world yet.
But the reflation path seems to be a long and relatively flat one, which is also going to apply to other commodities.
So is ORG attractive at this price? Yes, most definitely. But it may take you a while to get a massive return out of the stock.
Emerging Market Analyst, New Frontier Investor