A Swiss value investor who has outperformed most peers this year after sticking with his bet on energy stocks says the rally has further to run, as share prices catch up with earnings upgrades spurred by the Iran war.
SG Value Partners AG's Warburg Value Fund has returned 12% this year, outpacing 95% of rivals, according to data compiled by Bloomberg. As of March, energy stocks accounted for half of the top 10 holdings in portfolio manager Gregor Trachsel's €122 million ($143 million) fund.
This year's outperformance reflects the fund's long-held conviction—with many positions in the energy sector maintained for years—that a steady drop in oil prices predicted by some wouldn't materialize.
"People were saying all along that we've had peak oil long behind us—that it's a declining industry, a sunset industry," Trachsel, 58, said in an interview in Zurich, from where his firm oversees close to €300 million in assets. "But we like to take a second look at things that people throw away."
The US-Israeli war on Iran triggered the biggest oil supply disruption in history as the closure of the Strait of Hormuz blocked off shipments from major producers in the Persian Gulf. Global benchmark Brent crude is up almost 50% since the war erupted at the end of February.
Overall, energy names account for 11% of Trachsel's 83-stock portfolio. Key drivers of this year's gains for the fund include oil and gas drilling contractor Nabors Industries Inc., up 67% in 2026, Italian explorer Eni SpA, up 46%, and Finnish refiner Neste Oyj, up 42%.
The MSCI World Energy Index is the best-performing global sector gauge this year. At the same time, earnings expectations have climbed by more than 40% because of the boost to profits investors anticipate from soaring oil prices.
That's kept a lid on sector valuations, which now sit close to their most contained levels since President Donald Trump's global tariff campaign rattled markets a year ago.
"They're moving toward intrinsic value, but I think they have some juice left," Trachsel said of energy valuations. "Granted, you're looking a bit to the future here because people have gotten excited about oil stocks without the actual cash flows already accruing to the full extent."
Besides energy, SG Value Partners also holds sizable fund positions in cyclical sectors like industrials and materials. It's a preference in line with a growing taste among investors for heavy asset and low obsolescence -- so-called HALO -- stocks, viewed as less vulnerable to artificial intelligence disruption risks. The two groups accounted for 42% of the fund by the end of March.
Trachsel's fund has beaten 79% of peers over the past five years, though it lagged the benchmark MSCI All-Country World Index in 2023 and 2024 as energy and materials stocks struggled.
After a strong first quarter, actively managed funds have given up some of their outperformance in April. Of US large-cap managers, about 40% have beat the S&P 500 Index this year, according to Bloomberg Intelligence. With markets having largely recovered their conflict-related losses and US stocks at record highs, Trachsel also acknowledged it had become harder to identify undervalued targets.
"There are still opportunities, but they have become fewer," he said.