Portfolio Update
- Uranium: One of the benefits of having a position appropriately sized for your conviction and risk tolerance is that you are comfortable adding to it when prices and fundamentals diverge. OM added a further 4-5% to the Uranium position in the middle of quarter.
Performance and Review
OM continued to lag equity markets (S&P 500 TR: +8.7% and MSCI World: +7.2%) with the portfolio rising +5.85% during the quarter. This left the portfolio up +6.7% for year, well behind the S&P 500 TR (+16.9%) and the MSCI World (+15.1%).
Second Quarter Attribution
OM’s performance during the quarter can really be broken down into small number of things.
- Commodity-related names began to rebound during the second quarter. Both Tin (+85bps) and Uranium (+195bps) have seen their fundamentals improve – supply remains constrained (and potentially falling) while future demand incrementally improved – though the commodity price and stock prices have done little this year. This changed as the quarter progressed. The other Commodities (+28bps) exposure also benefited from this change.
- Two idiosyncratic events helped individual positions:
- Overstock (+133bps, within Blockchain +146bps) rallied after it purchased the Bed Bath & Beyond brand and intellectual property out of bankruptcy. The acquisition is transformative for the company allowing it to relaunch a popular brand, without any of the associated bricks & mortar business and costs. The firm also held a successful day highlighting its Medici Ventures Blockchain assets in late May.
- Greek stocks (+150bps) rose sharply after the ruling New Democracy party won a landslide election. PM Kyriakos Mitsotakis has largely done a good job of reforming the Greek economy, with the government bonds now close to an investment grade rating.
- However, Shipping (-141bps) gave back some of its first quarter gains as OPEC cut production further and investors worried this would negatively impact rates.
Beyond these OM’s portfolio benefited from the market’s tailwind led by the positions in India (+42bps), Brazil (+32bps), Idiosyncratic Equities (+21bps), and Biotech (+13bps). The Technology - 4th Ind Rev (-3bps) was a minor detractor as uncertainties in China negatively impacted the position in JD. Finally, OM’s exposure to rising medium rates (PFIX, +18bps) benefited as these interest rates increased.
Portfolio (as at 6/30/23 - all delta and leverage adjusted, as appropriate)
Dislocations: 27.8%
25.7% - Uranium (URNM, CCJ, NXE, PALAF, DNN, BNNLF, URG and SMR)
2.2% - Brazil (EWZ)
Thematic: 46.5%
12.4% - Shipping/Tankers (STNG, INSW, EURN, TNK and DHT)
9.4% - Tin (AFMJF, MLXEF and SBWFF)
6.3% - India (IBN, INDA and SMIN)
4.6% - Biotech: 4th Industrial Revolution (IBB & XBI)
5.2% - Greece (GREK & ALBKY)
4.2% - Blockchain/Crypto (ETHE and OSTK)
2.3% - Software: 4th Industrial Revolution (JD & WCLD)
2.2% - Commodities/Mining (FLMMF)
Idiosyncratic: 5.8%
5.8% - Equities (TPL & JOE)
Shorts/Hedges: 5.4%
5.4% - Higher Medium-Term Rates (PFIX)
Cash: 14.5%
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.
