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Fund manager identifies 6 top shares as portfolio holdings

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While it might feel safer following the crowd and owning the popular stocks, successful contrarian investors who are prepared to stand tall and back their judgement no matter how foolish it may seem to others have a habit of outperforming the market.

Right now, one sector which is certainly on the nose with most investors and definitely out of favour is energy.

The decade low oil price has played havoc with many oil and gas stocks, while the collapse in the coal price has had a negative effect on coal stocks.

This situation could make now the perfect time to start searching for undervalued investment opportunities within the energy sector.

Here are six stocks recently highlighted by listed investment company (LIC) Bki Investment Co Ltd (ASX: BKI) as being constituents of the BKI portfolio. Of these six, there are three that I would suggest could be worth closer inspection…

AGL Energy Ltd (ASX: AGL) – while the electricity generator and retailer owns an array of quality assets, at around 18x forecast earnings – from a contrarian perspective – I think more attractively priced opportunities are available within the energy sector.

New Hope Corporation Limited (ASX: NHC) and Wesfarmers Ltd (ASX: WES)both companies offer exposure to the coal sector and while this commodity has indeed been sold down and could be at a cyclical low, environmental concerns could see this commodity increasingly structurally side-lined.

Woodside Petroleum Limited (ASX: WPL) – as the giant of the ASX-listed oil and gas sector, Woodside is a key opportunity for positioning a portfolio to benefit from any eventual rebound in the oil price.

APA Group (ASX: APA) – as the owner of a range of key gas pipelines across Australia, APA’s share price has come under some pressure recently. However the long-term outlook for volumes would appear to remain sound and analyst consensus data is forecasting a solid rise in earnings over the next few years.

BHP Billiton Limited (ASX: BHP) – the share price of the “Big Australian” has been decimated over the past year and is currently trading at levels last seen back in 2004. BHP’s ability to leverage its size means it should be able to operate in the lowest production cost quartile globally and given its diversified exposure to a range of commodities, many of which are trading at multi-year lows, this stock appears to be a key consideration for contrarian investors.

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Motley Fool contributor Tim McArthur has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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