Mark Wharrier, fund manager of the BlackRock Income and Growth Investment Trust highlights some of the clear ‘winners’ of the declining global oil prices.
‘While there are obvious losers from the fall in oil prices, there are also winners. Many Emerging Markets, such as India, have limited natural resources and import oil – so will enjoy an immediate benefit to consumer incomes and balance of payments.
Consumers in Western economies are also obvious winners, with the benefit of the oil price fall being estimated as equivalent to a $200bn tax cut for US consumers. Within portfolios, clearly all companies which face the consumer will benefit from rising discretionary incomes.
We have specifically focussed on companies which have oil related input costs where the margin benefit of lower oil prices will drop through to higher profits. Carnival, the cruise line operator, is a good example of this dynamic; c.20% of the company’s cost base is oil and – given the market is dominated by two companies, Carnival and Royal Caribbean – the benefit is likely to be retained.’
The BlackRock Income and Growth Investment Trust plc has recently announced it Preliminary results for the period ended 30 October 2014. During the period the Company’s net asset value per share (NAV) returned 6.3% and the share price returned 5.2%. By comparison, the FTSE All-Share Index returned 1.0% (all percentages with income reinvested).
Since the year end the Company’s NAV has risen by 1.7% compared with a fall in the benchmark of 1.6% over the same period. The Company’s final revenue return per share for the year amounted to 5.70 pence per share.