Portfolio Update
- Our Man made an array of changes to the portfolio, which are all described in the September 2022 portfolio update.
Performance and Review
OM’s portfolio posted a healthy gain of +8.6% during the third quarter, despite equity markets falling back (S&P 500: -4.9% and MSCI World: -4.4%). Despite the strong third quarter, OM’s portfolio remains down -8.6%, though this is ahead of equity markets (S&P 500: -23.9% and MSCI World: -22.1%).
Third Quarter Attribution
OM’s outperformance during the third quarter was driven by the two core positions in the dislocation part of the portfolio. The positions in Shipping/Tankers (+593bps) were up significantly during the quarter, as it became clear that the supply chains for oil and especially oil products had become significantly more complex because of the Russia-Ukraine conflict. The large position in Uranium (+363bps) recouped much of Q2’s losses, with stocks responding to the increasing Uranium price and the continued signs of nuclear power’s mainstream acceptance. Finally, there was a meaningful contribution from OM’s play on higher medium-term interest rates (PFIX, +105bps) as markets adjusted to the high and sticky inflation numbers.
OM’s losses largely came in the portfolio’s other commodity-related investments; Tin (-167bps), Commodities/Mining (-24bps) and Carbon Credits (-55bps). The positions were hurt by the expectations of a slowing global economy. Tin was particularly negatively impacted by the slowdown in Semiconductor space, which is a major source of demand that turned sequentially negative during Q2 with many fearing the largest slowdown since 2000. For once, OM was appropriately sized and able to add to the position in Alphamin Resources (AFMJF) as long-term the world will use more semiconductors (Internet of Things, Electric Vehicles, greater automation, etc.) and Alphamin remains the best/lowest cost Tin mine and the best development resource globally, while also having limited debt and being cash flow generative.
The rest of the portfolio was broadly a wash though it was helped by a timely exit from the Funds (+66bps) positions. The rest of the performance included Biotech (+14bps), Software (-37bps), Idiosyncratic (-36bps), Blockchain/Crypto (+9bps), Brazil (+1bps), Greece (-31bps), India (+49bps), and Vietnam (+8bps).
Portfolio (as at 09/30/22 - all delta and leverage adjusted, as appropriate)
Dislocations: 39.9%
23.8% - Uranium (URNM, CCJ, NXE, PALAF, DNN, BNNLF, URG and SMR)
12.6% - Shipping/Tankers (STNG, INSW, EURN, TNK and DHT)
3.4% - Greece (GREK & ALBKY)
Thematic: 29.8%
7.8% - Tin (AFMJF, MLXEF and SBWFF)
6.7% - India (IBN, INDA and SMIN)
5.0% - Biotech: 4th Industrial Revolution (IBB & XLB)
3.8% - Blockchain/Crypto (ETHE and OSTK)
2.6% - Software: 4th Industrial Revolution (JD & WCLD)
2.3% - Brazil (EWZ)
1.9% - Commodities/Mining (FLMMF)
Technical: 0.0%
Idiosyncratic: 5.6%
5.6% - Equities (TPL & JOE)
Shorts/Hedges: 6.7%
6.7% - Higher Medium-Term Rates (PFIX)
Cash: 18.0%
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.
