Gaddafi, King of Oil

The overthrow of the Middle Eastern dictatorships is an undeniably positive event. Revolutionary movements at the time allowed the Western powers to become what they are today. The fall of the Berlin Wall also preceded a decade of intense economic growth. Perhaps Arab countries will be the emerging markets of tomorrow. But before we get to the new boom years, a lot of blood and oil are likely to flow.

Gaddafi is a madman. He proved it during his pointless interventions at the UN, but he is especially demonstrating it by assassinating his fellow men. The problem is that he is also very cunning and knows how to manipulate opinions. He proved it by humiliating Switzerland in the affair of the two hostages, following the arrest of his son in Geneva. Although we can be happy that the wind has turned against him, it is clear that before he falls he will still be able to do a fair amount of damage in his own country but also indirectly in the financial world, because of the oil price surge.

Sure, this is good news for oil companies like Chevron (NYSE:CVX) and Exxon (NYSE:XOM), but the increase in itself doesn't bode well for long-term economic growth. Plus, of course, it weakens the dollar, which is not to our liking. We have thus experienced, like the whole market, a calamitous week, suffering a generalized fall in stock prices AND the greenback.

Luckily, or rather by just reward, our defensive strategy was able to limit the damage. In some cases, as for VF Corp. (NYSE:VFC), we even witnessed some nice surprises, with +6.9% on the week, following good results. Perhaps we are witnessing the correction expected since the end of January. The market is indeed somewhat overheated compared to the fundamentals. But unfortunately the rise in oil prices is not likely to improve them.

So we are still in disappointing figures from a profitability point of view, especially with the CHF as the reference currency. With the euro, it is a little better, but well, it is at the price of a weakening of the single currency, so six of one, six of one...

Otherwise, no noticeable change in the portfolio, if it is not that CenturyLink (NYSE:CTL) has given up its top spot to Colgate-Palmolive (NYSE:CL). CTL has indeed announced poor results, which has caused its dividend payout ratio to explode. While the company usually increases its dividend in the first quarter, it did not do so this year. Perhaps this will be the first year without an increase in distributions in 37 years? Watch this space. Despite this, the merger with Qwest is well underway, the dividend yield is currently over 8% and it is very unlikely that this one will be cut. For this reason we still think that CTL is a buying opportunity, even if the fundamentals make it less so than when we bought it a year ago.