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.

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.

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.