Oil below $80? No problem for these stocks

November 17:

LONDON: In a world where slumping oil prices and weak economic growth are triggering fears of a deflationary spiral, especially in Europe, investors are picking out firms that stand to benefit from that testing environment.

Companies such as UK transport operator National Express , airlines Lufthansa and Air France-KLM and even some large consumer-goods groups like Nestle have all been singled out as beneficiaries of so-called “good deflation”, as fuel and other commodities get cheaper and perk up profits.

Deflation is not a zero-sum game: a widespread trend of falling prices would cast a pall across all sectors and push consumers to delay spending. US Treasury Secretary Jack Lew this week warned that European policymakers needed to do more to avoid a Japan-style “lost decade” of low growth.

But for now, with consumer spending in relatively good shape and the prospect of an interest-rate hike in the US buoying recovery hopes, some believe “good” deflation has the edge.

“The consumer is in good shape, the oil price is expected to be a bit lower and the dollar is going to remain strong. There are stocks that will benefit,” said Chris White, head of UK equities at Premier Asset Management.

National Express, which operates coach and bus routes everywhere from Coventry to Marrakesh, reported a 15 percent rise in profits before tax in the third quarter and stands to benefit from being able to cut the cost of fuel-price contracts, White said.

Source:  www.thenews.com.pk/Todays-News-3-284855-Oil-below-$80-No-problem-for-these-stocks?