Short-term dips in a company’s share price are not necessarily a signal to exit that company, and a fund manager’s skill is the ability to separate and sift the immediate reasons for the downturn from the company’s underlying strength and readiness for growth.
First State Investments head of global equities Habib Subjally said the international arm of Colonial First State Global Asset Management had continued to hold National Oilwell Varco equities – despite the share price being a “source of great frustration” due to oil prices – because it was fundamentally a good company, “a winner, able to take market share” in the land and offshore drilling rigs industry.
Subjally said First State Investments’ approach to global equities selection was to “identify single companies and deliberately stay away from styles, or countries, or sectors”.
The global equities team had a number of criteria when “focusing on the companies which will win from the changes going on”, he said.
“Their business model must be superior and give them a structural advantage. They must be able to convert that advantage to take market share. They must have good management [which is] investing in the business and the employees for the long term,” he said.
Returning to National Oilwell Varco, he said the company was making oil exploration and drilling “less of an art and more of a science; it’s improving safety, and it has the same software on all its oil rigs so its people can move around the world”.
Historically, oil companies had bought equipment from many different suppliers and “drilling for oil was a bit of an art form”, he said.
National Oilwell Varco had changed that model and had standardised software, which allowed all equipment on any rig to “talk with the one dashboard in the drilling room which is on top of the rig”, he said.
“We’ll stay in National Oilwell despite the short-term stock price dips because we look at the long-term dynamics,” he said.
