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.