Portfolio Update
OM made a number of changes to the portfolio during April with the catalyst being an influx of cash into the portfolio, aka OM’s retirement account, after he changed jobs. Those changes were recapped here.
Performance and Review
The start of the second quarter of 2021 saw the portfolio continue to outperform markets, though this reversed meaningfully in June. OM’s portfolio ended the quarter rising +6.1%, and trailed both the S&P 500 Total Return (+8.6%) and the MSCI World (Net, +7.6%). For the year, this leaves OM’s portfolio up +29.2%, with the S&P 500 TR (+15.3%) and the MSCI World (Net, +14.2%).
Second Quarter Attribution
The portfolio continued to benefit from its exposure to Uranium (+401bps), which remains the largest position. The trend of positive news flow continued during the second quarter culminating in Sprott Asset Management – a large well-known player in commodity circles – announcing the acquisition of Uranium Participation Corp and the establishment of the Sprott Physical Uranium Trust (“SPUT”). Sprott will be listing SPUT in New York (likely early Q4), where it has 4 other listed physical metals trusts, and will be marketing it with the ability to raise capital at market prices to purchase more physical uranium! Most importantly all of these things are happening as utilities are approaching the time when they need to start contracting to meet their future uranium needs. However, Uranium stocks have run strongly over the last 6-12 months, and in some cases are comfortably ahead of the fundamentals. While OM thinks we’re still in the early stages of this bull market, he reduced the position in early July by about a fifth.
The Dislocation portion of the portfolio was also aided by Shipping/Tanker (+118bps) and Energy (+128bps) positions, which benefited as economies continue to slowly reopen. For all the talk of electric vehicles and lock downs, gasoline demand in the US has already returned to record levels. Much like Uranium, the sharp rally in the stocks is ahead of the fundamentals and led to OM reducing exposure to both these areas in early July.
The sole significant negative contributor during the quarter was the Blockchain theme (-272bps), which gave back slightly over half of Q1’s gains. The losses came from OM’s positions in Bitcoin (GBTC) and Ethereum (ETHE) partially offset by the position in Overstock (OSTK). There has been much written about the fall in digital assets, OM merely notes the peak came after a fevered period of speculation and also coincided with the Coinbase IPO, which provided an alternative way for institutions to get broad exposure to digital assets. The only other negative contribution came from the Idiosyncratic Equities (-6bps).
The remainder of the portfolio posted gains, though largely lagged the S&P 500 as US markets outperformed International markets. This was most clearly seen in the Funds (+67bps), and the international positions – Greece (+18bps), India (+11bps), Brazil (+10bps), and Vietnam (+51bps). The 4th Industrial Revolution positions in Technology (+45bps) and Biotech (+2bps) were also contributors. Finally, the position in Tin (+33bps) contributed healthily though – in contrast to Uranium – the equities failed to keep up with the metal price, which continues to climb to record highs on the supply deficit.
Portfolio (as at 06/30/21 - all delta and leverage adjusted, as appropriate)
Dislocations: 51.2%
29.3% - Uranium (URNM, CCJ, NXE, PALAF, DNN, BNNLF and URG)
13.9% - Shipping/Tankers (STNG, INSW, EURN, TNK and DHT)
4.4% - Greece (GREK & ALBKY)
3.7% - Energy (AR & SD)
Thematic: 28.9%
9.3% - Blockchain/Crypto (GBTC, ETHE, and OSTK)
5.0% - Tech: 4th Industrial Revolution (JD & WCLD)
4.0% - Vietnam (VNM)
3.8% - Biotech: 4th Industrial Revolution (IBB & XLB)
3.8% - Tin (AFMJF and MLXEF)
2.5% - India (INDA)
0.5% - Brazil (EWZ)
Technical: 0.0%
0.0% - OEW Technical positions (DDM, SSO, and QLD)
Idiosyncratic: 15.9%
12.2% - Funds (ARTTX, CWS, GVAL, and CAPE)
3.6% - Equities (TPL & JOE)
Shorts/Hedges: 0.0%
Cash: 4.0%
Disclaimer: Nothing above represents a recommendation in any way, shape or form so please don’t even think of trying to take it that way. For added clarity, while Our Man is invested in all of the securities mentioned that’s a terrible reason for anyone else to do so. Our Man also holds some cash and a few other securities (of negligible value). You should not buy any of these securities because Our Man has mentioned them, but should do your own work and decide what’s best for you given your own circumstances/risk tolerance/etc.
