Friday, March 15, 2024

Position Update

Small changes:
  • Bought 1% Silver on the Wednesday night.  Thats my full position, silver is really volatile.
  • Copper shot up.  Southern Copper (SCCO) up 20% in a week.
  • Cash now at -6%.

The portfolio value usually creeps up, night-by-night.  This is the sweet spot, where it goes up softly, regularly...but not so much that you think about selling.

Probably doing nothing for a while, just paying down debt.

Gold Miners look worth investigating, but I don't have any money now.

Wednesday, March 6, 2024

Bought AEM:SGX

AEM is a semicon supplier making test platforms for Intel, which should benefit from Intel's new Foundry business.  They made a loss in 2023 due to the biggest-ever covid-"stay-at-home"-semicon-bubble deflating, and the stock is down 35%.  I got this idea from the Value Investing Substack (part1) (part2) (paid links).

Its both a growth stock and a cyclical:


I think the 2H23 results were a cyclical drop, they should recover with the semiconductor cycle. And they have a structural tailwind behind them with the US trying to construct semiconductor fabs outside Taiwan and Intel re-establishing its manufacturing capability.

The key question for this company is: how much of its revenue is cyclical/non-cyclical, and recurring/non-recurring?  I am not sure yet, but it would affect wether its a trade or a buy-and-hold:

Source: 2023 Results Presentation (slide 11)

Its trading at around 10X peak earnings, not as cheap as I'd like but OK for a fast grower.  I bought a 5% position.

Risks:

  • I don't have good knowledge of the semicon industry, hard for me to keep track of this niche (Suppliers of systems level testing equipment to Intel).

  • In January an inventory shortfall was discovered, company said it was due to a manual mistake.  I believe theres no high-level fraud.
  • The chart looks like shit and I may lose some fingers catching a falling knife.

  • Or dead-SGX-stocks remain moribund, while Q's and crypto rocket in a new liquidity bubble.
I'm in a negative cash position now, so won't be buying anything else.  Will take a few months to pay off from my dividends/salary:





This blog will probably be quiet for a while.

Saturday, March 2, 2024

Quick Updates: Risk On.

Bullish.  Now 99% invested:

  • Bought more bitcoin 2 weeks ago, up to 5% allocation (buy price).  Bitcoin shot up after that.  This is a trade, follow the Hedgeye trend signals.  I am not willing to hold thru the cycle.
  • Added small 1% position in Oil Tankers.  There is an upcoming shortage of VLCCs (22:00 to 28:40).  Its only a 1% position so I can average down later.  Risks are that 1) We may have a recession, 2025 onwards.  2) Rates are now artificially high from Red Sea Houthi Attacks, these will probably be resolved this year, so rates may drop.  3) From the chart, its not at the bottom now.

These don't invalidate the thesis but delay it, so I may get a better price later. 
Need to remind myself that this is cyclical, not a dividend play.  Don't hold forever.
  • Copper turned bullish in Hedgeye's trend signal last week.  I added 1% FCX as the highest beta copper play. Want to add another 1%.  Copper is a risk-on inflation hedge.  But FCX is a trade, won't hold it through the cycle.

Long term I expect a decade of inflation.  Every position (except Delfi) reflects this.  Medium term it may alternate between growth-inflation (risk-on) and stagflation (risk-off).

Can't shake the feeling that we passed over a recession that we should have had, and some parts of the market are looking bubbly (middle-of-bubble in AI, and start-of-bubble in crypto).  But I think no downturn till after the election.  I am guessing that bursting the bubble would lead to unrelated stocks (like mine) selling off by 10-15% - a buying opportunity before they recover.  But I don't want to sit out the bull market because of a possible 10-15% correction in a few years.

Other notes:
  • Delfi reported bad results due to higher cocoa prices, stock is down almost 10%.
  • United plantations reported good results, stock up 10%.  Too bad my position was half the size of Delfi.
  • Uranium needs to cool off after $100 excitement.  Fundamentally there may be a shortage of enrichment capacity that stops utilities buying.  I'll keep holding SPUT, its down almost 25% from its peak.  Gotta shake out the laser-eyed speculators.
  • Hedgeye turned bullish on China, for the first time in years.  I am not buying, partially because I got no cash left.  If I did, it would be a trade.

Wednesday, February 21, 2024

Bought Malaysia Smelting Corporation

Update on this company - it hasn't changed after my initial post more than a year ago.

Start with the tin price - it was stable in 2023: lower than 1H 2022, higher than 2H 2022:

The company has 2 segments, Tin Mining and Tin Smelting:

Smelting profits should be more stable, but were impacted by Covid in 2022 and the closing of an old smelting facility in 2023.  Its hard to tell which of the 4Q23 costs are one-offs or which are normal operating costs (either recurring or randomly occurring ones).  They have moved to a new smelter in P. Indah, which started operating in 2021.  They will start dismantling the old Butterworth smelter in 2024. 

The biggest risk seems to be that smelting profits/losses are inconsistent (especially Q423's loss), and we don't know how long this will continue.

Mining profits tend to follow the tin price, with variable revenue and fixed costs:

Don't overthink it.  Its a company that primarily makes money from Tin Mining - the profits and share price follow the tin price.

The company has adopted a dividend policy paying out at least 30% profits.  The 7 sen dividend is 34% of 2022 profits.  2023 earnings look "normal" - not too peak-ish.  At RM 2.10, it would be trading at 10 times 2023 earnings.


I bought MSC this week on the KLSE, making up 5% of my portfolio.

Saturday, February 17, 2024

Bought Oil, Sold Gold

A few hours after my previous post, Hedgeye's trading signal on oil changed to bullish trend. I've been waiting for months for this, so I bought a whole lot of oil stocks.  From 5% to 15%.  Risky, because its overbought and the signal can always flip back, but now is as good a time as any.

I still think we are in a decade of inflation.  I expect oil to maintain its price for one or two years, then explode in 2025 or 2026.  Like Uranium now.  Meanwhile, I'm paid to wait as oil companies gush cash (at 2023 oil prices) with generous dividends or buybacks.  For context, after peaking in 2022, the oil price hovered between $70-90 last year:

CNQ is a Canadian oil sands producer with long-life reserves, profitable, with generous dividends and share buybacks:

In 1Q24 they target to reduce net debt to 10 billion, after which they'll return 100% of free cashflow to shareholders.  I estimate either doubling dividends, or more than doubling share-buybacks.  Annualising their 9M23 profits, they are trading at a PE of 13.

Acker BP is a Norwegian O&G producer, that is still paying down debt but still also pays dividends:

Its trading at 12X 2023 earnings.

Var Energy is a smaller Norwegian producer, from Modern Investing Substack.  Although they pay dividends, they are a growth story, aiming to increase production by 50% by 2025.  Its trading 8 times 2023 earnings.  This company has more operational risk. 

The risks are politics and ESG.  Norway's district court overturned approval for several oil projects. While Canada will introduce a carbon tax.

Also sold my gold I'm as no longer expecting a recession.  And I need cash to buy stocks.

Wednesday, February 14, 2024

Turning Bullish

I think we are at the start of a new liquidity cycle.  And the US PMI looks like its stopped falling:




I've changed from a bear to a bull: 
  • Used last nights dip to cover all my shorts (at a loss).
  • Bought back 2.5% bitcoin.  I like IBIT and FBTC, the ETFs with the two largest flows.  One holds their coin with coinbase, the other self custodies, giving some risk diversification.
  • Bought another 2.5% of PSE (Philippines Stock Exchange).
I didn't get the recession/correction I hoped for.  Since 2021 we had a series of bubbles deflating (crypto, profitless tech, CRE), but no big market-wide crash (buying opportunity).  Too bad.  Play the market we have, not the market we want.

I want to buy more bitcoin.  Plus oil, coal and tin producers.  And maybe later some gold producers, a local bank and a local semicon company.



Sunday, February 4, 2024

Position update

- Covered half my short France and short Germany positions, realised a loss of about 1% of my portfolio.

- KRE is swan diving, this is not a banking crisis, just banks making losses and cutting dividends.  So no Fed rescue.  Wait for it to fall further before covering.  My short position is still at a loss.  Just remember to sell once everyone is talking about it (regardless of profit or loss).

Current positions:


Nearly 25% cash and gold.  I am growing less sure we get a recession, maybe its limited to certain parts of the economy, or is a series of small "rolling recessions" hitting different parts of the economy at different times (eg: crypto, tech, cars, CRE, small banks, junk bonds), while other parts are supported by government spending.  We could be almost through it.  The Mag7 bubble will pop one day, but its still bubbling now.

Want to cover my shorts slowly.  Want to buy a bit more too.  Oil producers, the Philippines Stock exchange, Glencore (mostly thermal coal) and copper producers look interesting.

Thursday, January 25, 2024

Position update

 Can’t write much now:

  - Shorts have gotten killed in the last 2 month rally, have covered XLRE, XLI, XLE at  loss

  - Sold Bitcoin and Eth a few days ago for a nice profit on Hedgeye’s signals. I have faith in Bitcoin, but not enough to hold a wildly volatile asset which produces no cash flows and can drop 70% peak-to-trough.  There are things I can hold through the cycle, this is not one of them.

  - Uranium doing nicely, keep holding.