Q: I’ve been putting some money into oil and gas stocks and energy service names over the last couple of weeks. That was a timely blog post on EFX yesterday, and my question relates to that company and PSI. Given the current elevated oil price environment, do you have a preference between the two (this question bakes in an assumption that you still like PSI, given that it’s in the portfolio, but correct me otherwise), or do you view them as complementary enough that owning both would be appropriate? If you do favour one over the other, please explain why.
5i Research Answer:
We might like to see a bit better growth at PSI but they look to be turning a quarter, have a good dividend and reasonable valuation. EFX has seen EPS ramp back up, helping to support the recent run in shares but top-line growth remains muted. The company is getting attention through demand for its power generation offerings which has added to a re-rating here. EFX is also selling non-core businesses and the recent earnings announcement looked quite good. We like both names but they are a bit different in terms of investor style. We would lean toward EFX given recent announcements, the momentum and increasing growth prospects.