Why Growth is Deep in the Heart of Texas
Frank Holmes,
CEO and Chief
Investment Officer,
U.S. Global Investors
November 2013
A recent TIME Magazine cover
features an engaging collage
of the 50 states reassembled
to fit within the boundaries of
Texas. With a growing number
of solid-paying jobs, affordable
housing, and low taxes, “the
Lone Star State is America’s
Future,” declares economist
and writer Tyler Cowen.
As a “Texa-Can,” I think the article gives compelling
insight into what I’ve personally witnessed during
my 20 years living in the states, which is very different
from my experience living and working in Canada,
where big government and overregulation abound.
I agree with the writer when he says there are “lessons
Texas has to teach.” For example, states and cities
could deregulate building development “so that
rents and home prices could be much lower,” says
Cowen. Or occupational licensing could be “scaled
back” so that it is not so onerous to start applying
one’s skill in the work force.
Notably, “a little more freedom in strategically
targeted areas—that is, a little more Texas—could
go a long way,” writes Cowen.
Whereas excessive regulations have often diluted
the efforts of entrepreneurs and resulted in fewer
innovations, lower profitability and less job creation,
Texas is quickly becoming the nation’s poster child
of how companies, communities, and individuals
flourish when allowed to operate under a more
business-friendly atmosphere.
Like the saying goes, “Everything is bigger in Texas,”
and that is true for many companies in the state.
Did you know that 52 of the Fortune 500 companies
are headquartered in Texas? The state is tied with
New York in having the second-most Fortune
500 companies.
It may also surprise you to know that these
businesses are diverse. Although the state is
well-known for its energy companies, such as
ExxonMobil, HollyFrontier, Valero Energy, and
Marathon Oil, there are many other major industries in the state including technology, airlines,
telecommunications, consumer discretionary, and
financials. Austin has Whole Foods and Dell. Dean
Foods, Dr Pepper Snapple Group, GameStop, and
Southwest Airlines are located in Dallas. Sysco and
Waste Management are in Houston, to name only
a few.
It is more than a twist of fate that Chief Executive
magazine has ranked Texas as the best state in
which to do business for the ninth year in a row.
The magazine bases its annual rankings on taxation
and regulation, quality of workforce and living
environment. After having talked to hundreds
of executives from around the world, I find these
metrics are a powerful recipe for success and worthy
of replication.
Perhaps after successive years of solid economic
growth in Texas, the U.S. is now recognizing how
the state offers a balance between prudent regulation
and capitalistic risk-taking?
If Texas were a Country, It’d be the World’s 13th Largest Oil Producer
Texas Crude Oil Production (Million Barrels per Day)
3.0
2.6
2.2
1.8
1.4
1.0
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1981
1983
1985
1987
1989
1991
1993
1995
My resources experience tells me Texas could not
have had this incredible success without being able
to fully capitalize on the innovative technology that
has unlocked the vast supplies located in the oil
and gas fields. Take a look at the vertical growth in
crude oil production this year. On a daily basis, the
state is pumping out more than 2.2 million barrels
of crude oil each day. At this rate, if Texas were
a country, it’d be the world’s 13th largest
oil producer.
Since the huge oil and gas boom, the state has
taken leadership in the expanding employment
in the industry. There are major oil and gas basins
throughout the U.S., but research shows Texas
has been providing the most jobs in recent years.
According to the Bureau of Labor Statistics, since
2010, the oil and gas sector added about 150,000
new positions. An incredible two-thirds were
in Texas.
In 2013, oil and gas companies in the Lone Star
State persist in leading this job growth too. About
2,400 jobs were added in the second quarter of
this year alone.
1997
1999
2001
2003
2005
2007
2009
2011
2013
Source: Bloomberg, U.S. Global Investors
Our portfolio managers, including Brian Hicks
and Evan Smith of the Global Resources Fund,
have many firsthand accounts of the economic
growth deep in the heart of Texas. They are often
visiting energy companies that report decades of
drilling ahead of them in the Permian Basin and
Eagle Ford. These basins are mere hours from
San Antonio, which has been U.S. Global Investors’
home base for more than 40 years.
Many fund families are located far from these
enormous energy opportunities, so our entrenchment in this area sets the Global Resources Fund
apart from our competition. We believe this
gives us a strategic advantage and is one reason
investors have entrusted us with their money for
the past 30 years.
Take time to check out TIME’s article on Texas,
including the magazine’s top 10 reasons Texas
is America’s future. And while you are at it, take
a look at the fund’s third quarter commentary,
which discusses performance and more about the
U.S. oil and natural gas boom.
Texas Leads the Country in Oil and Gas Employment Gains
Total Employment Since 2010
120,000
Jobs Added in Second Quarter 2013
3,000
103,700
100,000
80,000
2,000
60,000
1,500
40,000
1,000
20,000
26,600
500
14,500
+2,400
2,500
+1,100
+500
0
0
Alaska
Louisiana
Texas
Alaska
Louisiana
Texas
Source: Bureau of Labor Statistics, Mining and Logging; U.S. Global Investors
U.S. Global Investors, Inc. is an investment management firm specializing in gold, natural resources
and emerging markets opportunities around the world. The company, headquartered in San
Antonio, Texas, manages no-load mutual funds in the U.S. Global Investors fund family, as well
as funds for international clients.
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directed to a third-party website. U.S. Global Investors does not endorse all information supplied by this website and is not responsible for its content. Holdings in the Global Resources
Fund as a percentage of net assets as of 9/30/13: ExxonMobil 0.00%, HollyFrontier 0.00%, Valero Energy 0.00%, Marathon Oil 0.00%, Whole Foods 0.00%, Dell 0.00%, Dean Foods 0.00%,
Dr Pepper Snapple Group 0.00%, GameStop 0.00%, Southwest Airlines 0.00%, Sysco 0.00%, Waste Management 0.00%. 13-562