Podcast Summary: The Master Investor Podcast with Wilfred Frost

Episode: Jim Mellon: Why I'm Loading Up On Energy Stocks

Date: January 7, 2026
Host: Wilfred Frost
Guest: Jim Mellon (Chairman, Burnbrae Group)

Overview

In this insightful New Year episode, Wilfred Frost is joined by renowned investor and Master Investor Podcast founder Jim Mellon. They dive into Jim's latest moves in the markets, including why he’s heavily reducing exposure to gold and silver and aggressively "loading up" on energy—specifically oil and gas—calling it the next unloved sector poised for outsized gains. The conversation also covers high-profile tech stocks (the “Mag 7”), the global AI buildout, opportunities in robotics, and strategic takes on China and Japan. Jim concludes with big-picture advice for investors in 2026.

Key Discussion Points & Insights

1. Gold & Silver: A Successful Contrarian Call, Now Overdone

[03:03] - [08:59]

• Jim's 4-Year Gold/Silver Thesis: Jim reflects on his long-standing bullish position and successful call:

  “...when we conversed at the Master Investor show last year, I think we kind of came to a consensus that gold over 3,000 was a likely prospect, but now it’s 4,400... The move in silver has been absolutely extraordinary and I didn’t expect it to go this far.” – Jim Mellon [03:03]

• Reasons for the Huge Surge:
  • Central banks (especially China) buying for risk aversion and to de-emphasize the dollar.
  • Geopolitical drivers (e.g., Venezuela selling oil to China in yuan).
  • Massive retail demand and “mania” among everyday investors.
  • Outsize and opaque central bank activity and persistent inflation fears.
  • Jim warns of possible near-term pressure as gold and silver holders take profits.
• Position Change:

  “If I said that we’re down–we’re not down but we have reduced our position in gold and silver exposure by 80% I think that would be about accurate.” – Jim Mellon [08:06]

• Philosophy on Exiting Winning Trades:

  “You don’t stay for the last dance. I don’t believe in leverage in markets... you should [not] stay till the very last minute because sometimes you misjudge that and then you really get caught short.” – Jim Mellon [07:20]

2. Tech & AI (The “Mag 7”): Overvalued, Crowded, and Dangerous

[09:35] – [12:16]

• AI Stock Valuations:
  • Jim has been surprised by their resilience but flag’s extreme crowding, competitive spending, and leverage risks.

  “The stocks are way over-owned. It’s difficult to know who else is left to buy them... ETF flows shepherd money into these big names.” – Jim Mellon [10:43]

• Systemic Risk Warnings:
  • Noted that seven tech stocks now represent about 40% of the S&P 500:

    “That’s a huge and very dangerous concentration risk at a time when they’re all doing essentially the same thing... I wouldn’t be playing in that area.” – [11:42]

  • Specific concern about Oracle’s financial stretch.
• Avoiding the Herd:

  “My view in life is that you don’t need to be in the game that everyone else is playing. There’s plenty of other things to do and that’s what I try and do.” – Jim Mellon [12:03]

3. The Bull Case for Oil & Gas: The Forgotten, Underowned Sector

[12:40] – [19:30]

• AI Drives Energy Demand:
  • Huge new demand for electricity from data centers, especially in the U.S. and China.

  “If you believe that by 2030, $4 trillion will be spent around the world... on data centers... they’re going to require an additional 20% added to the current electricity supply in the United States.” – Jim Mellon [13:55]

  • Nuclear will take 5-10 years, so gap will be filled by natural gas, oil, and coal.
• Market Underappreciation:
  • Oil and gas stocks have high dividend yields, are under-represented in market indices, and “everyone’s been down on energy for quite a while.”

  “What’s the next unloved sector as gold and silver were four years ago? ... It’s oil and gas. And so we’ve been loading up, I mean, literally loading up on oil and gas.” – Jim Mellon [15:45]

• Geopolitical Wildcards:
  • Instability in oil-producing regions (Venezuela) increases the hedge value of oil and gas.

Jim Mellon's Energy Stock Picks [16:32]

• Majors & Regionals:

  • BP (UK), Shell (UK), Adnoc Gas (UAE), Equinor (Norway), Santos (Australia), Jersey Oil and Gas (UK North Sea)

• ETFs & Yielders:

  • First Trust National Gas ETF (US), Foresight Solar Fund (renewables), iShares Europe Energy, iShares Global Energy, Renewables Infrastructure, Vaneck Oil Services

• Oil services:

  • Schlumberger, Baker Hughes

  “We’ve been buying bp, we’ve been buying Adnoc Gas in the UAE, ... Equinor, ... Santos in Australia... some of the renewable funds which yield very heavily... I would add that Schlumberger and Baker Hughes look like good buys as well...” – Jim Mellon [16:32]

4. Venezuela’s Impact on Oil Markets

[19:30] – [21:03]

• Short-term, unstable; long recovery for Venezuela’s production.
• U.S. refiners benefit from access to heavy oil; Jim sees this as a long-term bolster, not a rapid game-changer.

“My reading of it is it will take at least five to ten years before they can get back up [in production]... It’s a nice bolster for U.S. refining capacity.” – Jim Mellon [19:30]

5. The Robotics Revolution: The Next Huge Theme

[21:24] – [29:04]

• AI’s Most Transformative Application:

  “This [robotics] is probably one of the best, if not the best use of AI that there is. But it’s going to take time.” – Jim Mellon [22:13]

• Global Landscape:
  • China leads manufacturing (cheaper, broad ecosystem), with hundreds/thousands of producers.
  • U.S. & West: Big tech “robotics plays” (Tesla, Nvidia, Amazon, Meta) are diluted by other large business segments.

  “Most of that money [in robotics] will be made in China... But the US for sure would not let them dominate globally, and Tesla is the purest play outside China...” – [25:06]

• Robo-Taxis as First Big Market:
  • Baidu (China), Waymo (Google/US): Key competitors. Robo-taxis safer, cheaper, and coming soon (within 5 years).

  “There is no reason why we won’t all get into robo taxis within five years. Why would we get in with a human driver when the robo taxis are basically safer... and they’ll be much more profitable for the operators.” – Jim Mellon [24:15]

• Jim’s Investment Focus:
  • Sees robotics overtaking all other sectors by 2040. Planning significant investments in China, using Hong Kong and Connect programs.

  “We will all need robots in our life... What form they take and how they work is yet to be determined, but they will work and we will all be avid users of them.” – Jim Mellon [28:30]

6. China Macro Snapshot & Currency Outlook

[29:52] – [33:03]

• Economic Worries:
  • Deflation, property crisis, real growth around 2–3%, youth unemployment high.
• Trade and Currency:
  • Despite tariffs, China maintains a $1 trillion surplus; exports regionally diversified.

  “Almost everything in China is 1/7 the price of the equivalent in the United States. So the currency is massively undervalued.” – Jim Mellon [31:02]

• Yuan Bull Case Complications:
  • Hard for Westerners to play; possible forced appreciation by Beijing.
• Yen as a Proxy:
  • Still undervalued; may appreciate 20% if short-term yields rise.

  “If the yield curve flattens a bit in Japan and you start to get interest on short-dated instruments... then the yen will become even more attractive...” – Jim Mellon [35:24]

7. Practical Investment Advice for 2026

[37:46] – [39:48]

• Keep it simple; be contrarian:

  “There’s no need to... be diversified without having 500 stocks in your portfolio... be contrarian, just take a bit off the table and look at energy as an opportunity as well.” – Jim Mellon [37:46]

• Beware of AI euphoria:
  • Watch out for cracks, especially in leveraged tech (e.g., Oracle).
• Quantum is Coming:
  • Quantum IPOs (e.g., UK’s Quantinium) are a key theme this year.
• UK Investment Trusts:
  • Look for those selling at discounts with UK domestic exposure.
• “Stick to your knitting”:
  • Focus, patient, value-driven investing and let compounding work over time.

Notable Quotes & Memorable Moments

• On contrarian investing:

  “You don’t need to be in the game everyone else is playing.” – Jim Mellon [12:03]

• On energy stocks:

  “I suggest loading up on oil and gas... this is going to be the big area of concentration this year in a positive sense.” – Jim Mellon [15:59]

• On robotics:

  “The robotics market will be bigger than any other market in the world, including food, including transport... by the year 2040.” – Jim Mellon [28:20]

• On the US tech bubble:

  “Frankly speaking again, it gets back to my thing. Leave the party before the last of the punch is drunk and the hangover sets in.” – Jim Mellon [11:09]

Timestamps for Key Segments

• Gold & Silver Thesis and Exit: 03:03–08:59
• AI/Tech Stock Overvaluation Warnings: 09:35–12:16
• Bull Case for Oil & Gas: 12:48–19:30
• Stock Picks & Rationale: 16:32–18:43
• Venezuela’s Market Impact: 19:30–21:03
• Robotics as Next Disruptor: 21:24–29:04
• China/Yuan/Japan Currency Macro: 29:52–35:47
• Final 2026 Investment Advice: 37:46–39:48

Closing Thoughts

Jim Mellon’s current strategy is a masterclass in contrarian, value-driven investing: exit overheated trades, steer clear of over-owned, over-leveraged momentum (the Mag 7), embrace out-of-favor areas like energy, and anticipate robotics and quantum computing as transformative themes. China features heavily in future plans, despite well-known risks. Above all, Jim emphasizes simplicity, patience, and the compounding effect over fads and hype—a timeless approach for turbulent times.