Portfolio Update
There were no changes to the portfolio during Q4.
Performance and Review
After a strong start to the quarter the portfolio fell back sharply in December, ending at -0.60% for the quarter. This put it well behind equity markets with the S&P 500 TR up +2.41% and the MSCI World up +1.93%. The result was that the portfolio ended the year at +19.9%, which unfortunately trailed both the S&P 500 TR (+25.0%) and MSCI World (+21.0%).
Over the last 5-years, the portfolio has marginally underperformed the S&P 500 TR though it has outperformed the MSCI World by ~200bps per annum.
Fourth Quarter Attribution
Despite underperforming the market, 2025 was a strangely satisfying year for OM; this was largely due to successes in position sizing. A well-sized position allows an investor to be proactive because they’re rarely a forced seller. OM has learned that for his ‘regret minimization’ this equates to being a little undersized (vs. his idealistic intentions).
The sizable positions in Uranium (-104bps in Q4) and Shipping (-295bps) have been key drivers of the portfolio over the last 3-years but were both flat for the year. Despite being major detractors in Q4, Our Man lost no sleep over them and with fundamentals broadly unchanged will potentially add to them in Q1. The same is true of the position in Carbon (-8bps); while OM originally expected it to become a material position during 2024 it ended up detracting in every quarter! However, the small size (2.5%) constrained the drawdown and by being disciplined and not adding during the year, OM is now well positioned as California Carbon Allowance prices trade close to the projected 2026 floor price.
The position sizing largely worked on the positive side too; Argentina (+532bps) and European/UK Financials (+32bps) were strong again in Q4 and delivered approximately 3/4 of the portfolio’s total gains during 2024. They have both derisked during the year – as President Milei successfully implements his agenda in Argentina and as the UK banks continue to positively surprise and buyback stock – and have grown into material positions.
Elsewhere, three potentially interesting positions for 2025 showed mixed results, and the next few quarters will be vital for all three. China (-40bps) gave back some of its Q3 gains as investors questioned the government’s willingness to support the economy (and market). Blockchain (+75bps) rallied on the likelihood of a change in regulatory approach in the US following President Trump’s victory. The likelihood remains that even if sized up and successful these investments will largely be out of the book within 12months or so; they are ones to rent not own. Finally, the Brazilian market continues to struggle with the bond and currency markets punishing the ruling government for its hefty deficit. OM suspects with the mid-term elections over we may see a more pragmatic President Lula, and markets respond to that.
Elsewhere, there was a negative cadence to the portfolio during the final quarter with a broad array of positions contributing small losses including Idiosyncratic Tin (-53bps), Biotech (-47bps), India (-36bps), Equities (-29bps), Commodities (-13bps), and Greece (-7bps). The sole outlier was the Reindustrialization of the US theme (+14bps).
Portfolio (as at 12/31/24 - all delta and leverage adjusted, as appropriate)
Dislocations: 55.0%
20.4% - Uranium (URNM, URNJ, NXE, and SMR)
13.2% - Argentina (BMA, GGAL, SUPV)
13.1% - European/UK Financials (BCS, LYG, NWG)
5.0% - China (KWEB, FXI and JD)
3.3% - Brazil (EWZ)
Thematic: 36.7%
7.4% - Shipping/Tankers (STNG, INSW, TNK, DHT and FRO)
6.4% - Tin (AFMJF, MLXEF and SBWFF)
5.3% - India (IBN, INDA and SMIN)
4.8% - Biotech: 4th Industrial Revolution (IBB & XBI)
4.6% - US Reindustrialization (AIRR)
4.4% - Blockchain/Crypto (IBIT, ETHE/ETH and OSTK)
1.6% - Carbon Credit Allowances (KCCA)
1.6% - Commodities/Mining (FLMMF)
0.7% - Greece (ALBKY)
Idiosyncratic: 5.1%
5.1% - Equities (TPL & JOE)
Shorts/Hedges: 0.0%
Cash: 3.2%
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.
