Comparing Direct Asset Investment vs Stock Performance for an Oil & Gas Investment

When considering how to add energy exposure to your portfolio, shares of public oil and gas companies are typically the first choice that comes to mind. While this approach is simple, holding shares of specific companies exposes investors to agency risk which can lead to a poor correlation between the price performance of the underlying asset (i.e. energy commodities) and a company's equity performance. History is peppered with examples of energy companies who mismanage debt to the detriment of shareholder value, even though the assets these companies manage are yielding attractive returns.

Comparing Direct Asset Investment vs Stock Performance for an Oil & Gas Investment

When considering how to add energy exposure to your portfolio, shares of public oil and gas companies are typically the first choice that comes to mind. While this approach is simple, holding shares of specific companies exposes investors to agency risk which can lead to a poor correlation between the price performance of the underlying asset (i.e. energy commodities) and a company's equity performance. History is peppered with examples of energy companies who mismanage debt to the detriment of shareholder value, even though the assets these companies manage are yielding attractive returns.