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.