Portfolio Update: Apr/May 2025 – The Time is Now!

OM used the ‘Liberation Day’ volatility in the market to concentrate the portfolio into his highest conviction ideas and reduce/exit others during mid-April.   The most notable exits were the positions in Brazil, Greece and TPL (Equities); all are interesting but lower conviction, and the market volatility offered attractive entry points elsewhere.  OM will spare you the market and political commentary and instead give you a sense of the core positions in the portfolio.   

OM has increased his allocation to Uranium, now comprising 22.6% of the portfolio as of May 22nd. He has also streamlined the position, consolidating it into two ETFs that represent both major and junior uranium miners.  In a fast-changing and often complex world, Uranium stands out as an anomaly. It is remarkably straightforward - its only use is as fuel for nuclear power plants - and everything about its market operates at a slow, deliberate pace. The core investment thesis has remained consistent for years: the lifespan of existing nuclear plants is being extended, new ones are gradually being built, and demand continues to rise. Meanwhile, mining uranium remains challenging and won’t scale meaningfully without higher incentive prices.  The uranium market moves slowly: long-term contracts dominate, new plants take years to construct and therefore don’t immediately impact demand, and new mines require lengthy permitting and development timelines. For long-term investors, this creates a market where supply and demand are easier to track, and where dislocations - like the dip in sentiment seen recently due to a falling spot price - can offer compelling entry points.

OM reduced his exposure to UK and European Financials, which now represent 12.9% of the portfolio, after a strong performance that saw many of these stocks double over the past 18 months. The investment thesis, first laid out in Q4 2023, remains largely intact.  As UK banks have addressed legacy issues - cleaning up their balance sheets and strengthening capital ratios - and benefited from a more favorable post-COVID environment (stable economies and higher interest rates), their underlying earnings power is beginning to emerge. This has prompted a market reassessment: stocks that were once priced as dire investments - such as Barclays, which traded at just 0.3x Tangible Book Value and 4.0x forward earnings - are now viewed as merely undervalued, with valuations improving to 0.6x TBV and 7.0x expected earnings.  OM continues to believe these banks will deliver further earnings growth and return substantial capital to shareholders through dividends and buybacks. However, with much of the re-rating already behind us, future gains are expected to be more measured.

OM maintained his ~12.5% position in Argentina, expressed through holdings in the country’s banks. As noted in the previous quarterly update, the scale, ambition, and early success of President Milei’s reform agenda have been remarkable, leading to a significant repricing of Argentine assets.  Despite the positions appreciating 2-3x over the past year, OM has chosen not to reduce exposure.  With many of the reforms now enacted into law, OM believes these investments are lower risk than when initially established. Looking ahead, OM expects the reform momentum to continue - particularly if Milei’s party performs well in the upcoming mid-term elections - which could provide further upside.

The final two core positions have been part of the portfolio for some time but were meaningfully increased during April. Each will be covered in detail in upcoming write-ups but below is a brief summary of the current investment thesis for both.

OM increased exposure to the U.S. Reindustrialization theme, which now accounts for 11.5% of the portfolio. While those in urban centers - particularly in the Northeast - may not see it firsthand or find it plausible, an industrial resurgence is already underway across the U.S.  Although President Trump is likely to take credit for this trend, the movement predates his current efforts. The shift began in the wake of COVID-19 and has since gained momentum through substantial legislative support under President Biden, including the CHIPS Act, the Inflation Reduction Act (IRA), and the Infrastructure Investment and Jobs Act (IIJA). While reshoring had been under consideration before the pandemic, COVID served as a stark reminder of supply chain vulnerabilities.  The advances in automation that have reduced the impact of labor costs have helped to make domestic manufacturing more financially viable.

OM significantly increased the position in California Carbon Allowances (“CCA”), which now represents 9.4% of the portfolio, following an Executive Order (“EO”) signed by President Trump in April that questioned the legality of California’s Cap-and-Trade program.  This EO marked the latest in a series of political and regulatory headwinds that had introduced uncertainty and pushed CCA prices down to their mandated floor. Despite the headline risk, the likelihood of a successful legal challenge appears low and, importantly, would take years to play out. In response, California’s political leadership has moved decisively, unveiling plans to extend the Cap-and-Trade program through 2045 - an action that both reaffirms long-term policy support and enhances the investment case.


Portfolio (as at 05/22/25 - all delta and leverage adjusted, as appropriate)
Dislocations: 53.4%
22.6% - Uranium (URNM & URNJ)
12.9% - European/UK Financials (BCS, LYG, NWG)
12.5% - Argentina (BMA, GGAL, SUPV)
5.4% - China (KWEB, FXI and JD)

Thematic: 43.8%
11.5% - US Reindustrialization (AIRR)
9.4% - Carbon Credit Allowances (KCCA)
7.3% - Shipping/Tankers (STNG, INSW, TNK, DHT and FRO)
5.0% - India (IBN, INDA and SMIN)
5.4% - Tin (AFMJF, MLXEF and SBWFF)
4.2% - Blockchain/Crypto (IBIT, ETHE/ETH and OSTK)
1.1% - Commodities/Mining (LUNMF)

Idiosyncratic: 2.4%
2.4% - Equities (JOE)

Shorts/Hedges: 0.0%

Cash: 0.4%

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.  

Things from my Newsblur; 2024 Part III

Some final things from my Newsblur to finish up the year, including helpful 2025 advice (from Cal Newport) and additional information on the development of the core theses in Uranium and Tin.   I hope everyone has a happy holidays, and a great 2025! 

 

How to Stop Being Lazy and Get More Done
For OM – and I’m guessing most of you – time is the primary constraint and to the to-do list never seems to shrink!   As OM tries to figure how to get more done, Cal Newport has become essential reading.  Here Erik Barker breaks down 5 of Cal’s secrets to better managing time and getting more done.   
(Erik Barker, Barking Up the Wrong Tree) 

 

The Tao of Cal
If the above piqued your interest then read on!  Cal Newport has proposed a lot of ideas on how the digital environment impacts our lives, both professionally and personally, and how we should respond.  This article serves as a primer that summarizes all of his major ideas.  There are some good new year resolutions in there, and it’s an article that OM is likely to come back to many times in 2025.
(Cal Newport, on his blog - one of the few you should regularly read, even if you don't use Newsblur!) 

 

Why luxury cheese is being targeted by black market criminals
An article inspired by the Neal’s Yard Dairy theft of £300,000-worth of high-end cheddar cheese!  It’s not just British cheddar; cheese theft has become a thing over the last few years as the price of cheese has risen, and with organized crime infiltrating the food industry.
(Dan Saladino, BBC)

 

What If We Run It Hot….?
For all of OM’s professional life central banks been focused on inflation - especially consumer price rises - over almost everything else.  While many of us, especially in Finance, are happy to ignore both the implied and the unintended consequences of this, the political costs are now beginning to be felt.   With the return of President Trump to the White House, Kuppy looks at what might happen if they economy is allowed to run hot and generate higher than normal inflation.
(Harris Kupperman, Praetorian Capital) 

 

The Eucalyptus Tree Goes to the Moon: The Koala’s Visit to Goma & the Bisie Tin Mine
OM’s day job means he cannot visit the companies he owns, let alone do site visits for some of the mining names.   In the case of Alphamin Resources this matters; the broad thesis is clear, the asset quality isn’t disputed, but it’s located in North Kivu, in the Democratic Republic of Congo.   Fortunately, while OM can’t go visit the site it helps to know folks who can – so if you’ve ever wanted to know more about Alphamin's actual mine, this is the article for you.
(The Koala, Substack) 

 

Repositioning in Uranium
OM’s largest position is still in Uranium.   Trader Ferg gives a good update on Uranium markets, including recapping the simple thesis behind the investment and the incremental positive changes that have occurred in recent years.   While the Uranium opportunity has seen the easy money made, the next leg of the move is substantially less risky than it was a few years ago.
(Trader Ferg, Substack)

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.  

Things from my Newsblur; 2024 Part II

It’s been a while since OM appeared in your inboxes, and so what better way to return than to catch-up on some of the things he’s been reading over the summer and early Fall.

AFC Wimbledon and the Pillars of a Perfect Football Club
OM is a fan and season ticket holder at AFC Wimbledon and will never tire of sharing their story.   OM was in London to see this victory over our rivals (not a derby!!!), and Daniel Storey captures the spirit of the day and what makes the club special.
(Daniel Storey, iNews)

Magic Pill – Johann Hari & the New “Miracle” Weight-Loss Drugs
Journalist Johann Hari takes a long look at Ozempic, and other GLP-1s, which have skyrocketed in popularity as a treatment for obesity.   Unlike most who’ve talked GLP-1s, Hari is on them and seen the benefits firsthand but also willing to take a critical look at how the drugs work and what it might mean for the future.   For those who prefer these things in podcast format, he’s spoken about it on Modern Wisdom and to Jay Shetty.
(via Tim Ferris blog.)

What Makes Katie Ledecky Great?
OM was having a drink recently with a friend and we were discussing investing, and the difference between mastery and greatness came up.  We concluded that greatness endures often through finding that balance between the contradictions of creativity and discipline and between focusing on process and outcome.  This article on Katie Ledecky – an unquestioned all-time swimming great – touches on those topics.
(Louisa Thomas)

Experts vs. Imitators
While we all want the best information, we are increasingly seeing people described as or claiming to be experts who are not.  Here’s a handy way to think about expertise and those who imitate it, including what to look out for and focus on.
(Farnam Street)

Inside the Biggest FBI Sting Operation in History
The wild tale of the Anom sting operation, where the FBI created/managed a secure messaging app, which became the go-to app for several global criminal groups.  The FBI worked in collaboration with law enforcement around the world, to help spread the app and track the messages before eventually making a string of arrests.
(Joseph Cox, Wired)

The Big Bad BREIT Post
The story of BREIT, the largest non-traded REIT in the world, is as old as finance - a liquidity mismatch between a product and the underlying asset, an array of misaligned incentives, and investors chasing performance with little regard for risk.  Thus, the tale of its issues when stresses hit the market in 2022 wasn’t new or particularly surprising.   What was is the lengths that the manager (and its agents/representatives) went to try to prevent the tale being told.  
(Phil Bak, BakStack)

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.