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Over-concentration in Oil and Gas Related Securities

Aidikoff, Uhl & Bakhtiari is investigating the over-concentration of investor accounts in the oil and gas sector. On Monday, March 9, 2020 the price of oil made its most significant one day moves since the 1991 Gulf War plummeting by more than 30 percent. As a consequence, investor portfolios that have excessive exposure to the oil and gas industries have sustained unnecessary significant losses.

Economist Harry Markowitz received the Nobel Memorial Prize in Economic Sciences for his seminal work in establishing the Modern Portfolio Theory in 1990. Modern Portfolio Theory seeks to maximizing the return investors can obtain in their investment portfolios when considering the underlying risk involved in the investments. Investors evaluate the risk of one investment in relation to impacting the entire portfolio. Modern Portfolio Theory attempts to eliminate “idiosyncratic risk” – the risk inherent in each investment due to the investment’s unique characteristics. In essence, Modern Portfolio Theory calls for diversification by asset class.

According to Markowitz, investors can create a portfolio maximizing returns by accepting a quantifiable amount of risk. This is accomplished when investors diversify their assets and asset allocation using a quantitative method. With a portfolio as such, if some assets fall in value due to market conditions, other securities should rise equally in compensation. Markowitz demonstrated that, by taking a portfolio as its whole, it was less volatile than the total sum of its parts.

If you are an investor that was over-concentrated in oil and gas related securities, you should consider all legal options. If you wish to discuss your particular situation and the potential for the recovery of your investment losses, or you have information of interest, please contact us for an evaluation of your potential case.