Credit Suisse is betting oil prices will bottom out around $25 and plans to boost its holdings of energy shares when it does, according to chief investment officer Michael Strobaek.
“Oil and the energy sector are getting outrageously cheap that it is worth taking big bets” Mr Strobaek told investors in Zurich.
“I’m hopeful and believe oil will hit $25 and then won’t go lower. It’s also a positive catalyst for a full flush-out of oil-related defaults.”
Energy companies in Brazil will be particularly attractive at that point, he said.
Mr Strobaek sees equities of Europe, Japan, and India as the biggest winners of the drop in crude.
Some companies are starting to see this — quarterly profit jumped at the Mumbai-based Reliance Industries on higher margins for turning crude into fuels.
In the eurozone, analysts project firms boosted their earnings by 10% in 2015.
It’s no secret oil’s plunge to a 12-year low is battering energy companies: In the US, 26 energy firms filed for bankruptcies in 2016, more than the five previous years combined.
Norway, the biggest crude exporter in western Europe, declared a crisis in the sector, while Latin America’s Sete Brasil Participacoes has not paid the world’s two biggest oil-rig builders since November 2014.
Still, as further losses trigger credit events among US energy companies, which will clean up the “deeply distressed” industry and offer more buying opportunities in equities, said Mr Storbaek said.
While analysts cut earnings estimates, oil stocks have fallen faster, leaving them cheaper than before.
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