Invesco bets on oil, says gold outshines copper

By Claire Sibonney

TORONTO (Reuters) - Canadian fund manager Norman MacDonald is betting that oil, natural gas and gold stocks, despite fluctuating commodity prices, are the resource picks that will give him the best bang for his buck, but he sees less opportunity in base-metal and potash plays.

The lead manager of the Trimark Canadian Resources fund, which beat the market by more than 6 percent last year, said a key part of his strategy is to focus on the long-term outlook for a commodity and not get caught up in daily moves.

While oil collapsed from $140 a barrel down to $40 between 2008 to 2009, MacDonald profited by blocking out the daily "noise" and sticking with his $55-$60 target, while the stock market priced in an ultra-low oil environment.

"Let's say I didn't take that long-term approach, and I just kind of used the day-to-day oil price, I would have ended up selling oil stocks right at the worst possible time, rather than buying them," MacDonald told Reuters.

"It was a great opportunity to buy oil stocks at very low price to cash flow and price to net asset valuations."

The C$515 million ($505 million) fund won the Canadian award for 2009 from fund tracker Lipper in the resources equity category for the three-year period. Invesco Trimark is a unit of Invesco Ltd. (IVZ.N: Quote)

Toronto-based manager MacDonald takes a bottom-up approach to stock picking by modeling a company's cash flow based on an assumed long-term price of a commodity that he's comfortable with. He evaluates the worth of the business from there.

The fund's top energy holdings include Nexen Inc (NXY.TO: Quote), Cenovus Energy CVE.N and Niko Resources (NKO.TO: Quote).