2025: Second Quarter Review

Portfolio Update 
As noted in the recent portfolio update, Our Man made several changes to the portfolio during the second half of April.   

- Uranium: OM increased and consolidated the exposure, by adding to the Uranium Miners ETF (URNM) and the Uranium Junior Miners ETF (URNJ), while fully exiting the remaining single name positions (NXE and SMR).

- US Reindustrialization: OM remains confident that the market continues to underestimate the scale and impact of US reindustrialization.  OM increased the position in the American Industrial Renaissance ETF (AIRR).

- Carbon: OM materially increased the position in California Carbon Allowances (KCCA) as prices traded near their floor.

- Commodities: A small position in Lundin Mining Corp (LUNMF) – inherited through the takeover of Filo Mining Group (FLMMF) - was modestly increased.

- European/UK Banks: Positions in Barclays Bank (BARC), Lloyds Banking Group (LYG) and Natwest Group (NWG) were all trimmed.

- Position Exits: OM fully exited several smaller holdings to reallocate capital towards higher conviction ideas.  These included positions in Greece (ALBKY), Brazil (EWZ), and Biotech (IBB and XBI) and the Idiosyncratic Equity position in Texas Pacific Land (TPL).

Performance and Review
Our Man’s portfolio bounced back strongly during the second quarter, posting strong gains in each month and rising 19.4% during the quarter.  This was comfortably ahead of the S&P 500 TR (+10.9%) and the MSCI World (+9.5%).

The portfolio’s Q2 gains saw it end the quarter at 12.0% YTD, which is comfortably ahead of the market (S&P 500 TR: +6.2% and MSCI World: +6.6%).

Second Quarter Attribution

 

While nearly all positions contributed positively, Q2 performance was driven primarily by the Uranium position (+1,107bps), which rallied just under 50% in the quarter.  Truthfully, little new or special occurred in Q2 - OM simply benefited from having a well-sized position and the discipline to look through Q1s volatility.  The position gained from several ongoing tailwinds:

• Data center demand for nuclear power: Tech hyperscalers continued efforts to secure nuclear energy for AI-driven data center growth—an initiative underway since 2023. Notable examples include Amazon’s $650M deal with Talen Energy (March 2024)  and the planned reopening of Three Mile Island for Microsoft.
•  Policy support: The Trump Administration has been vocal in its pro-nuclear stance, taking Q2 steps to streamline nuclear project approvals.
•  Technical tailwinds: Strong inflows into the largest physical Uranium ETF further tightened the spot market.

OM increased the Uranium position by 600bps in mid/late April, though some of the gain from this was offset by consolidating into ETFs (with SMR rallying over 2.4x after OM’s exit). Given the rally and increased sizing, OM expects to materially reduce the position during Q3.

Other major contributors: European/U.K. Financials (+298bps) and US Reindustrialization (+224bps) rallied after Q1 earnings exceeded expectations and forward guidance helped ease investor concerns.  Tin (+158bps) surged in April after geopolitical risk around Alphamin’s Congo mine eased, following a U.S.-brokered settlement between DR Congo and Rwanda. The position also benefited from a strategic shift, with Alphamin’s largest shareholder agreeing to be bought out by Abu Dhabi–based International Resources Holding.  Blockchain/Crypto (+110bps) was supported by expanding global liquidity and a post-halving price trend consistent with prior cycles. OM still expects to exit this theme during 2025.

The only significant detractor was Argentina (-128bps), which gave back a portion of its strong 2024 gains.  While President Milei’s reforms are off to a solid start and are improving the macro outlook and buoying investor confidence, progress remains early.  The upcoming October midterms will be a key test.   Short-term sentiment was also dented after Argentina was not added to the MSCI Emerging Markets Index in June – a disappointment for some investors and a drag on local equity market performance.

The portfolio saw healthy performance from Shipping/Tankers (+66bps), India (+53bps), Carbon (+43bps), and Commodities (+30bps).  Meanwhile, China (+1bp) and Idiosyncratic Equities (+4bps) had no material impact on performance.  Positions that were exited during the quarter modestly detracted from performance – Greece (-11bps), Biotech (-17bps), and Brazil (+7bps) – though this capital was redeployed profitably elsewhere.   

Portfolio (as at 06/30/25 - all delta and leverage adjusted, as appropriate)
Dislocations: 54.3%
28.0% - Uranium (URNM & URNJ)
12.4% - European/UK Financials (BCS, LYG, & NWG)
8.7% - Argentina (BMA, GGAL, & SUPV)
5.2% - China (KWEB, FXI & JD)

Thematic: 42.4%
11.7% - US Reindustrialization (AIRR)
9.2% - Carbon Credit Allowances (KCCA)
6.7% - Shipping/Tankers (STNG, INSW, TNK, DHT & FRO)
4.9% - India (IBN, INDA & SMIN)
4.8% - Tin (AFMJF, MLXEF & SBWFF)
3.9% - Blockchain/Crypto (IBIT, ETHE/ETH & OSTK)
1.2% - Commodities/Mining (LUNMF)

Idiosyncratic: 2.5%
2.5% - Equities (JOE)

Shorts/Hedges: 0.0%

Cash: 0.7%

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.

2025: First Quarter Review

Portfolio Update
There were no changes to the portfolio during Q1.
However, OM made a number during April so expect an update on them (soon).

Performance and Review
Our Man’s portfolio started 2025 slowly, falling by -6.3% during the first quarter, underperforming the MSCI World (-2.7%) and the S&P 500 TR (-4.3%).


First Quarter Attribution

Investors often look for "inefficient" markets where prices don’t reflect an asset’s true value, offering a chance to profit. However, these same inefficiencies - or a lack of capital to correct them - can cause prices to stray much further from fair value, and for much longer, than expected. OM has learned, often through mistakes, that it’s wise to keep positions undersized in such markets. Smaller positions allow for patience: staying in winning trades longer and avoiding the need to sell too early in losing ones and possibly even adding to them.

OM’s performance was driven largely by losses across 4 investments - Argentina (-205bps), Uranium (-439bps) Tin (-241bps), and Blockchain/Bitcoin (-103bps) - that clearly display traits of being inefficient markets.   The three primary drivers are discussed below:

In Argentina, President Milei has rightly received accolades for the speed, size and scope of his reforms.  OM’s Argentinean Bank equities have been significant beneficiaries, generating over 1,000bps of contribution in 2024.  Unsurprisingly, with negotiations over a deal with the IMF dragging on and those same equities using their increased valuation to raise capital, the positions saw healthy profit taking in Q1.  

We’ve talked about how Uranium is an inefficient market. One key reason is that most uranium is bought through complex private long-term contracts while the spot market (unlike other commodities) is small and heavily influenced by sentiment. Despite this, investors tend to focus on the spot price, which is much more volatile. For example, spot Uranium dropped from over $100 in January 2024 to $64 by March 2025, while the long-term price actually rose from $72 to $80. Uranium miners tend to act like a leveraged version of the spot price; URNM, the Uranium Miners ETF, fell from over $60 in early 2024 to under $30 by March 2025. While spot prices have swung wildly the underlying value, which is reflected more in the long-term price, has continued to grow steadily. This is because we're approaching a supply-demand crunch, and current prices aren’t high enough to encourage new production. OM sees this shift - from over-excitement to under appreciation - as a potential opportunity.

Tin took a major hit this quarter due to rising conflict in the Democratic Republic of Congo (DRC). In Q1, the M23 rebel group - reportedly backed by Rwanda - captured significant territory. Alphamin Resources, which operates the world’s most important tin mine in the DRC, chose to suspend operations and evacuate staff as a precaution, even though the mine is some distance/hard to access from the fighting. This caused the stock to drop sharply. While the actual risk may be lower than the market fears - “the map is not the territory” - it was a well-known risk in investing in Alphamin, and limited OM’s position size.  Some of the losses in Alphamin were offset by strong gains in Metals-X. Late in the quarter, the DRC proposed a minerals-for-security deal with the US, which has led to peace talks between the DRC, M23, and Rwanda.

These losses were partially offset by strong performance in China (+90bps), which rallied on hopes of government support and stimulus coupled with low valuations, and UK/European Financials (+270bps).  Large UK banks like Barclays aren’t seen as undercovered or inefficient investments. However, the years of post-financial crisis challenges - cleaning up balance sheets, low interest rates, weak economic and political sentiment, and low economic growth - have led the market to expect little change, even as conditions start to improve. For example, even after Barclays’ stock more than doubled in the last 18 months, it still trades at just 0.6x its Tangible Book Value (TBV). While the lofty pre-GFCs valuations of over 3x TBV are unlikely to return, OM believes there's still upside as earnings improve and the market gradually recognizes that the future looks better than the post-GFC past.

The rest of the portfolio was a wash; Idiosyncratic Equity (+61bps), Brazil (+48bps), Greece (+43bps) and Commodities (+1bp) contributed positively.  Their performance was offset by Reindustrialization of the US (-51bps), Biotech (-30bps), Carbon (-24bps), India (-24bps), and Shipping/Tankers (-22bps).

 

Portfolio (as at 03/31/25 - all delta and leverage adjusted, as appropriate)
Dislocations: 55.5%
16.8% - Uranium (URNM, URNJ, NXE, and SMR)
16.7% - European/UK Financials (BCS, LYG, NWG)
11.8% - Argentina (BMA, GGAL, SUPV)
6.3% - China (KWEB, FXI and JD)
4.0% - Brazil (EWZ)

Thematic: 32.3%
7.4% - Shipping/Tankers (STNG, INSW, TNK, DHT and FRO)
5.3% - India (IBN, INDA and SMIN)
4.7% - Biotech: 4th Industrial Revolution (IBB & XBI)
4.3% - US Reindustrialization (AIRR)
4.2% - Tin (AFMJF, MLXEF and SBWFF)
3.5% - Blockchain/Crypto (IBIT, ETHE/ETH and OSTK)
1.4% - Carbon Credit Allowances (KCCA)
1.2% - Greece (ALBKY)
0.3% - Commodities/Mining (LUNMF)

Idiosyncratic: 6.1%
6.1% - Equities (TPL & JOE)

Shorts/Hedges: 0.0%

Cash: 6.1%

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.  

2024: Fourth Quarter Review

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.  

2024 - Third Quarter Review

 Portfolio Update
- Uranium: OM made a small addition to his position in the Junior Miners (URNJ) in the middle of the quarter.

Performance and Review
The portfolio rose +4.50% during the quarter, though substantially all of the performance came in the second half of September!  Overall, the portfolio slightly lagged equity markets with the S&P 500 TR up +5.89% and the MSCI World up +4.69%.   For the year, this leaves the portfolio + 20.64% which is nestled between the S&P 500 TR (+22.08%) and MSCI World (+18.75%).

Third Quarter Attribution

The third quarter saw some of the ‘newer’ dislocation positions come to the fore, with UK/European Financials (+191bps), Argentina (+148bps) and China (+118bps) driving returns. Sometimes being lucky on timing is what turns a good idea into a great return driver; all three of the positions have been successful since they were initiated.   The common thread is that OM waited longer than he typically does before entering them.  For example, both European/UK Financials and Argentina are ideas that OM spent much of H1-23 thinking about and working on.   Yet in both cases he waited till well after the work was done before entering.  OM was researching European/UK Financials in Q1-23, and despite the pullback after the Silicon Valley Bank collapse, he didn’t enter the position till early Q4-23 when it became apparent that Barclays’ earnings were inflecting upwards and management would have to acknowledge this in their 2024 guidance.   Similarly, while OM had done a lot of work on President Milei and his likely policies, OM didn’t enter the position till after President Milei’s electoral victory and the confirmation of his economic team.  While this meant he missed out on some gains during 2024, it allowed for more confident sizing of the position.

The primary detractors to performance were the long-held positions in Uranium (-139bps) and Tankers/Shipping (-120bps) though there has been no significant change in the theses to those positions.  In both cases supply is exceptionally constrained in the foreseeable future, while demand continues to tick higher.  In uranium, the moves to restart old nuclear plants (most notably the deal to restart Three Mile Island) and build new ones continues to further improve the medium-term outlook, though the nuclear fuel contracting for these plants won’t happen for a while.  However, OM believes that it makes it more likely that existing utilities (who are undercovered for their fuel needs) will seek a secure supply of fuel before these new plants come to market.   Given the supply deficit this is likely to get reflected in another material price jump, hopefully in 2025.  There were other losses in Blockchain/Crypto (-57bps) and Carbon (-7bps).

The rest of the portfolio benefited from some positive idiosyncratic developments, most notably in Tin (65bps, Alphamin continuing to execute), Commodities (+43bps, a takeover of Filo), Idiosyncratic (+63bps, strong performance from TPL).  Elsewhere, some of the core themes including Biotech (+33bps), Brazil (+33bps) and Reindustrialization of the US (+38bps), and India (+31bps) continue to grind higher, with the first three setting up strongly for 2025.  The residual position in Greece (+8bps) made a small contribution.

Portfolio (as at 09/30/24 - all delta and leverage adjusted, as appropriate)
Dislocations: 52.1%
21.8% - Uranium (URNM, URNJ, NXE, and SMR)
12.6% - European/UK Financials (BCS, LYG, NWG)
7.8% - Argentina (BMA, GGAL, SUPV)
5.5% - China (KWEB, FXI and JD)
4.3% - Brazil (EWZ)

Thematic: 40.9%
10.4% - Shipping/Tankers (STNG, INSW, TNK, DHT and FRO)
7.2% - Tin (AFMJF, MLXEF and SBWFF)
5.8% - India (IBN, INDA and SMIN)
5.2% - Biotech: 4th Industrial Revolution (IBB & XBI)
4.4% - US Reindustrialization (AIRR)
3.6% - Blockchain/Crypto (ETHE and OSTK)
1.7% - Carbon Credit Allowances (KCCA)
1.7% - Commodities/Mining (FLMMF)
0.7% - Greece (ALBKY)

Idiosyncratic: 5.4%
5.4% - Equities (TPL & JOE)

Shorts/Hedges: 0.0%

Cash: 1.6%

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.  

2024 - Second Quarter Review

Portfolio Update
Our Man made some changes to the portfolio, with most of the theses discussed in the recent portfolio updates.

• Uranium:  Our Man rejigged his uranium exposure largely exiting single names and reinvesting the capital into the two ETFs (URNM and URNJ) that cover the miners and junior miners in the space.   The introduction of URNJ just over a year ago means that OM can hold broader exposure to junior miners, including to those listed globally.

• Shipping/Tankers:  OM continues to slowly prune the position, trimming the position in TNK.

• US Re-industrialization: As noted in the recent portfolio update, OM believes that the broad theme of US re-industrialization is significantly overly looked and added additional exposure (AIRR).

• 4th Industrial Revolution/Software:  OM exited the position in Software names, in part since the below positions have similar underlying properties/exposures.

• Blockchain: OM entered a position in one of the new Bitcoin ETFs, around the time of Bitcoin’s halving (which reduces future supply).   As recently noted, “while the Bitcoin halving slows future supply, OM suspects that this 12-month post-halving cycle will be driven by Institutional FOMO (vs. prior halvings’ retail FOMO) now that exposure can be more easily obtained via ETFs.”

• China: OM entered positions in both a broad China ETF (FXI) and Chinese Technology Company ETF (KWEB).   The thesis for this dislocation position can be found here.

• Greece: Finally, OM exited most of the position in Greece (GREK).  While Greece remains a reasonable opportunity, there are other more attractive opportunities and it lost out in competition for capital.

 

Performance and Review
The portfolio rose broadly in line with equity markets during the quarter with its +3.97% increase placing it between the S&P 500 TR (+4.28%) and the MSCI World (+3.03%).   Overall, this leaves it marginally ahead of the indices year-to-date at +15.44% (versus S&P 500 TR at +15.29% and MSCI World at +13.43%).

Second Quarter Attribution

The portfolio continued to benefit from its exposure to European/UK Financials (+173bps), Argentina (+140bps) and Shipping/Tankers (+159bps).  The UK Financials continued the trend of the last 6-12 months; increasing earnings and improved visibility on futures earnings as they reset interest rate hedges at higher rates.   While the market slowly adjusts to this, the stocks continue to trade at significant discounts to book value and single digit PEs.   The positions in Argentina benefited as President Milei’s initial reforms continue apace, including receiving Congressional approval.   It is early days for President Milei, and while things have started well economically there will inevitably be bumps in the road and the Argentina positions will be volatile.  The Shipping/Tankers positions continue to benefit from global uncertainty, with both the Russia/Ukraine and Israel/Hamas conflicts effectively tightening supply due to ships leaving the market (to transport Russian oil) or having to take longer routes to reach destinations (due to Houthi targeting of ships).

Elsewhere, Tin (+85bps) was a healthy contributor on the back of positive expectations for semiconductors (Tin’s primary use is acting as the ‘glue’ in semiconductors) and reduced supply after a scandal in Indonesia (one of the largest suppliers) limited exports.   The positions in India (+60bps) also helped - stocks initially dropped following Modi’s re-election in India before recovering as it became clear that he & his coalition partners would retain a working majority despite the opposition’s improved performance.

The primary detractors were positions in the Blockchain (-139bps), Brazil (-81bps) and China (-55bps).  The Blockchain positions were hurt by a pull-back in BYON as it reorganizes its retail businesses, and by the decline in Bitcoin/Ethereum from near their highs at the end of Q1.    While both Brazil and China are attractive fundamentally, both have continued to struggle and remain at/near their lows.  Elsewhere OM had small losses in Technology-4th Industrial Revolution/Software (-6bps, in part due to timing of exit and reallocating cash), Biotech (-6bps) and Carbon Credit Allowances (-11bps).

The remainder of the portfolio were small positive contributors, led by Uranium (+29bps), Greece (+18bps), Idiosyncratic (+15bps), US Re-industrialization (+9bps) and Commodities (+6bps).


Portfolio (as at 06/30/24 - all delta and leverage adjusted, as appropriate)
Dislocations: 50.5%
23.3% - Uranium (URNM, URNMJ, NXE, and SMR)
11.5% - European/UK Financials (BCS, LYG, NWG)
7.0% - Argentina (BMA, GGAL, SUPV)
4.6% - China (KWEB, FXI and JD)
4.2% - Brazil (EWZ)

Thematic: 42.6%
12.3% - Shipping/Tankers (STNG, INSW, TNK, DHT and FRO)
6.9% - Tin (AFMJF, MLXEF and SBWFF)
5.8% - India (IBN, INDA and SMIN)
5.2% - Biotech: 4th Industrial Revolution (IBB & XBI)
4.3% - Blockchain/Crypto (ETHE and OSTK)
4.2% - US Re-industrialization (AIRR)
1.9% - Carbon Credit Allowances (KCCA)
1.4% - Commodities/Mining (FLMMF)
0.7% - Greece (ALBKY)

Idiosyncratic: 5.1%
5.1% - Equities (TPL & JOE)

Shorts/Hedges: 0.0%

Cash: 1.8%

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.  

2024: First Quarter Review

Portfolio Update
Our Man made a smattering of changes to the portfolio in mid-January.    The changes saw some new dislocations/themes added to the portfolio, as well as some adjustment of existing position sizes.

- Added Argentina (new Dislocation):  Following President Milei’s victory in the Argentine elections and the initial burst of reforms, especially the moves to liberalize the exchange rate, OM took an initial position in Argentine Banks.   OM will pen something in in greater depth, should this position be materially increased, but for those with interest you can read the positive case, as articulated by one of OM’s friends (an EM specialist).

- Added American Reindustrialization (new Theme):  Professionally, OM has been discussing this as the biggest under the radar theme in markets today.   The difficulty is that it’s hard to express well given it’s a tailwind for a broad swathe of largely mid-cap companies, but a primary driver for very few.   Thankfully, the First Trust RBA American Industrial Renaissance ETF (AIRR) captures many of the names impacted by the theme.

- Carbon Credits (new Theme): OM re-entered the Carbon Credits theme, taking exposure to California Carbon Allowances (KCCA).  

- Reduced Shipping/Tankers:  OM exited the position in EURN as following its transaction with FRO the company is no longer a tanker play.

- Reduced Uranium (URNM):  OM took some profits in Uranium, given the exceptional performance in recent months.  URNM rallied over 60% between the end of June 2023 and OM’s trim in mid-January 2024.

- Added to Brazil – OM made a small addition to the Brazil position.


Performance and Review
The portfolio rose with the markets during the first quarter of the year; its +11.04% increase slightly surpassing both the S&P 500 TR (+10.56%) and the MSCI World (+10.09%).  

First Quarter Attribution

 

There were four primary drivers of performance in Q1 - two long-held positions and two of the newer positions.   The positions in Uranium (+248bps) and Tankers/Shipping (+230bps) were again the largest drivers of performance.   They both continue to benefit from a continual stream of incrementally positive news and have gone from controversial and ignored ideas, to broadly accepted but underappreciated and underinvested ones.   

The US’ relationship with nuclear (and thus uranium) is similar to the rest of the world; over the last 2-3 years the US has seen growing bipartisan acceptance of nuclear culminating in President Biden’s recent endorsement.  However, despite this the US is likely to be the last place to commission a significant expansion in nuclear power as the US has high construction costs and amongst the lowest electricity prices in the world.  OM’s expectation is that US firms will first learn by building plants overseas, using this to help reduce the cost structure to something closer to that achieved by the Koreans (but still more expensive than the Chinese).   Thus, despite the broad acceptance, new US nuclear plants are likely to signal the end of the Uranium trade than being a purely positive sign.

The newer positions in Argentina (+210bps) and European/UK Financials (+169bps) were strong contributors.  The UK Banks continue to suggest improvements in their earnings and have been rewarded with steadily increasing estimates and investor interest.  In Argentina, it has quickly become clear that President Milei is seeking to make major changes very quickly.  There is, and will continue to be, much debate about the pace of the changes but Milei has learned from Macri’s failed attempt at gradual reform a decade ago.   The reforms are broadly things that have been discussed about Argentina for years including liberalizing the exchange rate regime, shrinking the money supply (including running down the central bank notes, LELIQs, which were held by the banks), balancing the budget and the start of structural reforms.  The reforms will no doubt fail to be perfect, and their passage into law and implementation will be complicated, but the general direction is positive.

Elsewhere, the portfolio received healthy gains from positions in the Blockchain thesis (+117bps) after a spot Bitcoin ETF was approved by the SEC.  The most successful time to own cryptocurrencies has historically been from ~6mos before the Bitcoin halving to ~1 year afterwards.  Despite this being well known, OM suspects this will once again prove to be the case around the May-24 halving.  Thus, while the exposure here may increase in 2024, expect it to only last till this time next year.

Elsewhere the gains slightly outpaced the losses, which is unsurprising given the strong market performance.  There were solid contributions from Reindustrialization of the US (+64bps), Tin (+43bps), Greece (+31bps), India (+25bps), Biotech (+21bps) and Commodities (+14bps).  The only detractors came from positions in Brazil (-41bps) and Carbon (-24bps).


Portfolio (as at 03/31/24 - all delta and leverage adjusted, as appropriate)
Dislocations: 46.3%
24.2% - Uranium (URNM, CCJ, NXE, PALAF, DNN, BNNLF, URG and SMR)
10.7% - European/UK Financials (BCS, LYG, NWG)
6.2% - Argentina (BMA, GGAL, SUPV)
5.2% - Brazil (EWZ)

Thematic: 48.2%
13.4% - Shipping/Tankers (STNG, INSW, TNK, DHT and FRO)
6.6% - Tin (AFMJF, MLXEF and SBWFF)
5.5% - Biotech: 4th Industrial Revolution (IBB & XBI)
5.5% - India (IBN, INDA and SMIN)
4.4% - Blockchain/Crypto (ETHE and OSTK)
4.0% - Greece (GREK & ALBKY)
3.3% - US Reindustrialization (AIRR)
2.5% - Carbon Credit Allowances (KCCA)
1.7% - Software: 4th Industrial Revolution (JD & WCLD)
1.4% - Commodities/Mining (FLMMF)

Idiosyncratic: 5.2%
5.2% - Equities (TPL & JOE)

Shorts/Hedges: 0.0%

Cash: 0.3%

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.

2023: Fourth Quarter Review

Portfolio Update
All of OM’s portfolio changes happened at the start of November:
- European/UK Financials:  OM built the recently discussed position in European/UK Financials.   
- Biotech:  OM increased the Biotech position by ~1.75%.
- Shorts/Hedges - Higher Medium-Term Rates:  OM exited the position in PFIX at the start of November, as the 10-Year Treasury traded around 5% meaning that higher rates for longer were finally being priced in.  The timing proved fortunate as subsequent economic data and commentary from various Fed/Treasury officials led markets to change their view and expect numerous rate cuts in 2024.

Performance and Review
OM’s portfolio rose with the markets during the final quarter of the year; its +10.73% increase fell between the S&P 500 (+11.69%) and the MSCI World (+9.84%).  This resulted in the portfolio ending the year +31.29% for 2023, which was ahead of markets (S&P 500: +26.29% and MSCI World: +23.18%).    While a solitary year means little, 2023 ended up being decent overall performance especially considering the portfolio protected capital in 2022.

Fourth Quarter Attribution

While there has been much talk of the ‘Magnificent 7’ (aka MAG7), a small cadre of technology-related stocks driving the market higher with limited contributions from others, that was not the case for OM.    While OM owns none of the MAG7, it was in many ways close to an ideal year for the portfolio.   

The portfolio benefited from the timing/maturity of its core exposures; the Shipping/Tanker theme drove performance in 2022 and early 2023, before handing over to the Uranium positions that contributed over +1,000bps to performance in the second half of the year.   With the Shipping/Tanker theme in its ‘beginning of the end’ phase, it will likely continue to be cut back and shrink during 2024.  Uranium is – after a long wait – finally in the sweet spot of its investment lifecycle as the opportunities on the demand side, challenges on the supply side, and the material gap between demand/supply are now beginning to be understood by industry players and reflected in market pricing.   More generally, OM’s belief remains that the demand/supply trends we are seeing in the Uranium sector are likely to be repeated in many other mining/commodity sectors in the coming years.

The turbulent and uncertain markets in 2022/2023 were also generous in helping offer up new opportunities (European Financials) and the chance to increase exposure to some existing ones (Biotech).  This is something that has continued into the early part of 2024, with OM having started new positions in Argentina (Dislocation) and American Re-industrialization (Thematic) and added to the Brazil position.

The portfolio’s fourth quarter performance was largely reflective of the market, with everything contributing to performance.   The standout was the exposure to European/UK Fins (+197bps) that rose 20%+ as their third quarter earnings began to further highlight the value proposition for investors.  The portfolio’s Blockchain (+177bps) exposure was helpful, with the position in ETHE benefiting from the expectation of a Bitcoin ETF getting SEC approval in January 2024, and the belief that an Ethereum one would be next.

The non-Uranium commodity positions continue to lag, with Tin (+4bps) and Commodities (+8bps) making marginal gains.   In many ways there are similarities to where the Uranium (+186bps in Q4-23) position was in 2021, with clear signs of the coming stresses in the market visible to the few who are looking.        

Elsewhere, the weakness in the US Dollar helped the international positions; India (+56bps), Greece (+48bps), and Brazil (+104bps).  The rise in rates early in Q4 saw OM exit the Short/Hedge exposure (via PFIX, +16bps), while the subsequent change in rate expectations helped Technology – 4th Industrial Revolution (+26bps) and Biotech (+101bps) names rally strongly in the second half of Q4.   There were also decent contributions from the Shipping/Tankers theme (+122bps) and the Idiosyncratic names (+23bps).


Portfolio (as at 12/31/23 - all delta and leverage adjusted, as appropriate)
Dislocations: 45.4%

29.6% - Uranium

10.1% - European/UK Financials
5.7% - Brazil

Thematic: 44.5%
14.7% - Shipping/Tankers 

6.9% - Tin 

5.9% - Biotech: 4th Industrial Revolution 

5.8% - India 

4.2% - Greece 

3.7% - Blockchain/Crypto 

1.9% - Software: 4th Industrial Revolution 

1.4% - Commodities/Mining 

Idiosyncratic: 5.8%
5.8% - Equities 

Shorts/Hedges: 0.0%

Cash: 4.3%

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.  

2023: Third Quarter Update

Portfolio Update
All of OM’s changes to the portfolio came at the end of the quarter.
- Shipping/Tankers:  OM added a position in Frontline plc (FRO), the largest tanker company, prior to the seasonally strong fourth quarter.   While Tanker stocks have done well over the last couple of years, there remains the expectation that pricing will moderate in 2024 and 2025.

- Brazil: OM used the pull back in Brazilian stocks to increase the position.   

- Higher Medium Term Interest Rates:  In late Q3 the market finally began to accept the possibility that inflation may take longer to get under control and rates are likely to remain higher for longer.  This saw medium term interest rates climb materially, and OM took some profits by closing ~60% of the PFIX position which has more than doubled over the last 12-18mos.

Performance and Review
After lagging the markets during the first half of the year, OM’s portfolio materially outperformed in the third quarter rising +11.1% (compared to the S&P 500 TR: -3.3% and MSCI World: -2.6%).   This left the portfolio +18.6% YTD, which now leads the markets (S&P 500 TR: +13.1% and MSCI World: +12.1%).

Third Quarter Attribution
 

There were four main positive outliers that drove the performance.

•    Uranium (+884bps):   Both the spot price of uranium and the miners increased ~20% during September following the World Nuclear Association conference in London.  While OM didn’t attend the conference, he spoke with others who did and it’s clear that the tone was quite different this year.   In previous years utility buyers have been confident of securing uranium at attractive prices, but this year saw the first signs of uncertainty with the industry’s primary consultant now (finally) forecasting an under supplied market.   The move in the spot price, and continued climb in the long-term contract price, likely signals that we’re entering the middle innings of the rise.  For OM this likely means the thesis is moving from a dislocation opportunity to a thematic one.   However, much like uranium traded well below the cost of production on the downside, OM suspects that it will trade at unsustainable levels to the upside before the supply response arrives.

•    Higher Medium-Term interest rates (+283bps):  As mentioned above, during the quarter the markets finally came around to the view that interest rates were likely to remain higher for longer.  PFIX, which holds short-term bonds and medium-term swaptions, benefited both from the higher for longer move as well as the volatility that came with it.

•    Shipping/Tankers (+202bps):  Tanker shares continued to rise, with most companies announcing earnings and revenue numbers that beat expectations, paying sizable dividends, and guiding strongly.  The market continues to view the current strong fundamental performance as cyclical.  However, as OM sees it as somewhat longer lasting.  I’ll save you from hearing the thesis in depth again, but it’s one that permeates much of the portfolio; constrained supply due to long-term underperformance coupled with limited ability to quickly increase supply, all at a time when demand is inflecting upwards.

•    Idiosyncratic Equity positions (+110bps): The gains were evenly split between TPL and JOE, with the common factor being that both own attractive real estate – TPL in the Permian Basin in Texas and JOE in Florida panhandle.   Their similarities diverge there, with TPL benefitting from royalty interests and water-related services from the shale drilling in the Permian.  JOE develops resorts and residential communities, and in OM’s view has reached a critical mass of developments and population such that it makes it easier to continue to grow.

The majority of OM’s portfolio fell back with the market including positions in Software/4th Industrial Revolution (-19bps), Brazil (-12bps), Greece (-49bps), and Biotech (-34bps).  Unlike Uranium, the rest of the commodity-related exposure - Tin (-80bps) and Commodities (-50bps) – performed poorly.  The exposure to India (+50bps) was a pleasant outlier.

Finally, the Blockchain exposure (-160bps) was a meaningful drag on performance as Overstock gave back all its second quarter gains.   In Q2, Overstock made the transformative acquisition of Bed Bath and Beyond’s intellectual property and set about rebranding itself.   The third quarter reminded investors that it’s a process that will take time and relies on management execution.  Given the job management has done since taking over from ex-founder/CEO Patrick Byrne, OM has patience.

Portfolio (as at 10/2/23 - all delta and leverage adjusted, as appropriate)
Dislocations: 36.2%
30.6% - Uranium (URNM, CCJ, NXE, PALAF, DNN, BNNLF, URG and SMR)
5.5% - Brazil (EWZ)

Thematic: 42.1%
14.9% - Shipping/Tankers (STNG, INSW, EURN, TNK, DHT and FRO)
7.5% - Tin (AFMJF, MLXEF and SBWFF)
6.0% - India (IBN, INDA and SMIN)
4.2% - Greece (GREK & ALBKY)
3.8% - Biotech: 4th Industrial Revolution (IBB & XBI)
2.3% - Blockchain/Crypto (ETHE and OSTK)
1.9% - Software: 4th Industrial Revolution (JD & WCLD)
1.4% - Commodities/Mining (FLMMF)

Idiosyncratic: 6.2%
6.2% - Equities (TPL & JOE)

Shorts/Hedges: 3.0%
3.0% - Higher Medium-Term Rates (PFIX)

Cash: 12.5%

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.  

2023: Second Quarter Update

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.  

2023: First Quarter Update

Portfolio Update

There were no changes to the portfolio during the Quarter.

Performance and Review

OM’s portfolio posted a small gain of +0.8% to start 2023, which lagged the rising equity markets (S&P 500: +7.5% and MSCI World: +7.4%).  

First Quarter Attribution

 

The first quarter was largely uneventful for the portfolio with the positive performance driven by the exposure to Shipping/Tankers (+237bps), which continued their strong run.  The long-run structural case for Shipping/Tankers is one that is seen elsewhere in the portfolio; constrained supply due to long-term underperformance coupled with limited ability to quickly increase supply, all at a time when demand is inflecting upwards.  For tankers, the supply-side is the most attractive in decades for tankers with the oldest fleet in history, an order book (as % of fleet) at multi-decade lows and shipyards contracted out through 2025.  While demand had been steadily inflecting upwards, it jumped more meaningfully in 2022 due to the Russia-Ukraine war which altered hitherto efficient supply routes.  The upside for an investor in these types of investments is that the pain of the prior cycle means the market never quite believes that supply has rationalized, is unwilling to fund new supply and constantly expects disappointment and reversion to the historical mean.  This means that the opportunity can last longer (and potentially move higher) than it would otherwise, but the downside is that its performance will come in violent fits and starts.  This exceptional volatility – as every small downturn is assumed to be the end of the cycle, and as every rally converts more to the thesis but sees current prices extrapolated out – is the largest challenge for investors as prices will not move steadily alongside markets (i.e. there will be periods of massive under/outperformance) and investors must size positions at levels where they can suffer the downside.   

After a decade of disappointment, many commodity markets reflect this constrained supply, at a time of increasing demand, theme.  OM has concentrated the portfolio’s exposure primarily in Uranium and Tin, where the structural limits in supply and demand are particularly evident.  The Uranium exposure (-66bps) was a meaningful detractor in the quarter, while the Tin (-2bps) and other Commodity (-1bps) exposure were broadly flat.

OM benefited from some mean reversion in Blockchain (+50bps) and Software (+5bps), which had both been material underperformers in 2022.   These names were both also helped by the expectation that interest rates were peaking and would fall, following the failure of Silicon Valley Bank in March.   The change in interest rate expectations hurt OM’s play on Higher Medium Term Interest rates (Short/Hedges, -103bps).

Elsewhere performance was a mixed bag ranging from negative contributions in Idiosyncratic (-51bps), India (-29bps) and Biotech (-23bps) to a positive one from Greece (+71bps).  Brazil (-4bps) was a small negative detractor but remains the position OM is most likely to add to alongside Uranium and Tin.  In addition to the return of Lula as President, the Brazilian Central Bank was more proactive in managing inflation (increasing rates from 2% to almost 14% from the early 2021) and is now reaping the benefits of that.   

Portfolio (as at 4/1/23 - all delta and leverage adjusted, as appropriate)

Dislocations: 22.5%

20.6% - Uranium (URNM, CCJ, NXE, PALAF, DNN, BNNLF, URG and SMR)

1.9% - Brazil (EWZ)

Thematic: 46.8%

15.1% - Shipping/Tankers (STNG, INSW, EURN, TNK and DHT)

9.2% - Tin (AFMJF, MLXEF and SBWFF)

6.0% - India (IBN, INDA and SMIN)

4.8% - Biotech: 4th Industrial Revolution (IBB & XLB)

4.4% - Greece (GREK & ALBKY)

3.0% - Blockchain/Crypto (ETHE and OSTK)

2.5% - Software: 4th Industrial Revolution (JD & WCLD)

2.0% - Commodities/Mining (FLMMF)

Idiosyncratic: 6.0%

6.0% - Equities (TPL & JOE)

Shorts/Hedges: 5.5%

5.5% - Higher Medium-Term Rates (PFIX)

Cash: 19.3%

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.  

2022: Fourth Quarter Update

Portfolio Update

- After the array of changes to the portfolio during the third quarter (see update), OM made no changes in the fourth quarter.

- As noted in the update, at year-end OM moved the Greece & Shipping positions from Dislocations to Thematic.  The Shipping positions were OM’s largest contributor during 2022 – adding over 1,200 basis points to performance - and are pricing in a vastly more attractive future than they were 12 months ago.  Given the changes on both demand and supply side, the positions remain attractive going forwards but no longer offer excess opportunity.  

- OM moved the position in Brazil from Thematic to Dislocation at year end, after President Lula returned to power.  It’s a situation – along with Turkey (no position, yet!) – that OM has spent a lot of 2022 researching so expect an update soon.

Performance and Review

OM’s portfolio posted a healthy gain of +6.4% during the fourth quarter, though this lagged the rising equity markets (S&P 500: +7.6% and MSCI World: +7.5%).  Despite the rally during the fourth quarter, OM’s portfolio ended the year down -2.7%, though there was some small consolation as this was ahead of equity markets (S&P 500: -18.1% and MSCI World: -16.3%).

Fourth Quarter Attribution

 

Our Man’s portfolio largely rose with the market during the fourth quarter.   The Shipping/Tanker positions (+190bps) contributed strongly and were positive in each of the four quarters during 2022 despite the falling market.  In addition to the impacts of the IMO 2020 regulatory changes, they were and remain beneficiaries of the energy market complexity caused by the Ukraine/Russia crisis.  To repeat a simple example, pre-conflict a small Aframax tanker would fill-up with crude oil in Russia make the short run to Europe (Rotterdam) where it would be refined into oil products.  Due to the conflict this has become something akin to a couple of Aframaxes fill up in Russia, head out to sea to a ship-to-ship transfer to a larger VLCC, which then travels all the way to India or China, while other crude tankers service Europe with oil from the US or Middle East.  Furthermore, after the oil has been blended with non-Russian oil and refined in India and China the resulting oil products (gasoline, jet fuel, etc.) are likely heading back to the West on product tankers.  While this is a massive simplification it’s a good demonstration of how inefficient the reality of today’s oil supply chains are compared to preconflict!   Tankers travel a lot of extra miles and with fixed supply, unsurprisingly price is the variable that has changed benefiting these companies.

OM’s commodity exposure was also beneficial with both Tin (+248bps) and Commodities (+59bps) contributing.   The month-to-month moves in Tin and the related stocks can be volatile and impacted by recessionary fears but the medium-term story remains simple.  It is one of a currently balanced market where a commodity that has no substitutes is seeing increased inelastic demand coupled with declining supply.  There are only three western listed ways to participate, and OM is invested in all, with an outsized position in Alphamin Resources.  Alphamin, as part of its Bisie tin project, owns both the premier global tin asset (the Mbapma North deposit), as well as the best development asset (Mbapma South deposit, which is ~1km from Mbapma North reducing the development risk).  The caveat is that the Bisie tin project is in the Democratic Republic of Congo.

OM also benefited from the Idiosyncratic positions (+143bps, equally split between TPL and JOE), Greek exposure (+70bps) and the market’s view that medium term yields would be higher (Shorts, +41bps).

Despite the market rising, there were negative contributions from Uranium (-63bps) and Blockchain (-105bps).  The latter was impacted by the bankruptcy of (and potential/likely fraud at) FTX, which saw all cryptocurrencies fall.  While OM intended to exit the Ethereum (ETHE) position during Q4, the panic saw the Grayscale Ethereum Trust fall to a ~60% discount to the value of its Ethereum holdings.  Digital Currency Group (“DCG”, owner of Grayscale, the Trust’s sponsor) was caught up in the maelstrom around FTX’s bankruptcy and there are fears that like FTX it may have commingled assets leading to questions around the veracity of the Trust’s NAV.  OM is more sanguine than the market, in part as the assets are custodied at Coinbase, a US-listed entity (unlike Bahamas based FTX, or somewhere in the world based Binance).  Coinbase has released a statement confirming the assets are held separately, have/continue to be audited, cannot be lent out as well as the amount held.  While fraud remains possible it would require systemic corruption amongst US-based and listed bodies including DCG, Coinbase, third-party auditors and regulatory bodies.   Given this probability, OM felt it would be imprudent to sell ETHE at a 60% discount to its value (an equivalent to ~$500 for Ethereum).

Portfolio (as at 1/1/23 - all delta and leverage adjusted, as appropriate)

Dislocations: 23.8%

21.7% - Uranium (URNM, CCJ, NXE, PALAF, DNN, BNNLF, URG and SMR)

2.0% - Brazil (EWZ)

Thematic: 45.7%

13.5% - Shipping/Tankers (STNG, INSW, EURN, TNK and DHT)

9.6% - Tin (AFMJF, MLXEF and SBWFF)

6.4% - India (IBN, INDA and SMIN)

5.1% - Biotech: 4th Industrial Revolution (IBB & XLB)

3.9% - Greece (GREK & ALBKY)

2.6% - Blockchain/Crypto (ETHE and OSTK)

2.5% - Software: 4th Industrial Revolution (JD & WCLD)

2.1% - Commodities/Mining (FLMMF)

Idiosyncratic: 6.6%

6.6% - Equities (TPL & JOE)

Shorts/Hedges: 6.7%

6.7% - Higher Medium-Term Rates (PFIX)

Cash: 17.3%

Disclaimer:  Nothing above represents investment advice or 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 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.