If you're looking for an extremely long-term stock pick from billionaire Bill Gates, here it is: Avoid Big Oil.
As the world moves away from fossil fuels and adopts more clean and renewable energy sources, oil giants that have dominated markets for more than a century could be in trouble, the Microsoft co-founder said in a briefing at the COP26 climate summit in Glasgow, Scotland, on Thursday.
"Some of these giants will fall. You know, 30 years from now, some of those oil companies will be worth very little," Gates, an outspoken advocate for investing in renewable energy and green technologies, said at the briefing, according to Axios.
Companies like ExxonMobil, BP and Royal Dutch Shell all have seen their stock prices decline over the past five years — especially at the onset of the Covid-19 pandemic, which crippled demand for oil and resulted in huge losses for even the biggest oil and gas companies.
ExxonMobil, the largest oil and gas producer in the U.S., lost $20 billion in last year. The company still sports a market value of $275 billion — but as countries like the U.S. shift their energy policies to fight climate change, and the automotive industry moves toward an electric future, investors are becoming increasingly dubious about the future of oil stocks.
"With the oil companies, we still just don't think they represent good long-term businesses," David Moss, head of European equities at BMO Global Asset Management, told CNBC's "Street Signs Europe" in August.
Major oil companies that pivot their businesses toward forms of renewable energy stand a chance of surviving, Gates said at the briefing. But in May, International Energy Agency analyst Heymi Bahar told "Street Signs Europe" that major oil companies are unlikely to ever become leaders in renewable technologies.
"Will they become the major investors of renewable technology? The answer is no," Bahar said. "Will they increase their pace? Yes, for sure."
In Glasgow, Gates said he believes oil companies could transition their businesses relatively easily from fossil fuels to cleaner energy sources. He cited low-carbon hydrogen — which, when burned, emits less carbon into the air than today's greenhouse gases — as one possible example.
"We have a pipeline infrastructure in the United States that probably can be retrofitted to transmit hydrogen," Gates said.
But his investment track record doesn't indicate optimism. In his latest book, "How to Avoid a Climate Disaster," Gates wrote that in 2019, he divested all of his "direct holdings in oil and gas companies, as did the trust that manages the Gates Foundation's endowment."
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