Company Interview / Mathan's picks to reap the benefit of rising oil prices

Key Points:

Energy sector, especially Viva Energy (ASX:VEA) and Ampol (ASX:ALD), positioned to benefit from oil price rises BHP (ASX:BHP) and major miners impacted by changing global flows and commodity price shifts Defensive yields favoured due to macro uncertainty and potential rate hikes Advises caution on defence and software stocks during current volatility

Mathan Somasundaram from Deep Data Analytics views the recent volatility in equity markets as a reflection of ongoing uncertainty, with oil prices climbing to $80 and inflationary pressures building. Somasundaram points out that the Australian market stands out due to its blend of sectors and unique exposure to the commodities cycle. The energy sector, previously overlooked, now attracts significant attention, with oil and gas stocks as well as retailers like Viva Energy (ASX:VEA) and Ampol (ASX:ALD) seen as beneficiaries of rising prices. According to Somasundaram, these companies could strengthen margins during periods of economic volatility, although an economic slowdown may limit fuel demand.

Turning to materials, Somasundaram observes that major miners such as BHP (ASX:BHP) have experienced sharp declines, notably driven by global investment flows and changing dynamics in commodities like iron ore and copper. He expresses the view that large mining stocks had become overpriced and institutional funds are now pulling back, creating further index volatility.

Somasundaram is cautious about defence and software stocks in the current uncertain macro climate, preferring defensive yield positions while awaiting greater clarity. He highlights the risk that rising rates pose to the broader economy and suggests investors should focus on balanced portfolios and maintain robust risk management.