I’m taking this opportunity to put on some hedges. I’ve recently raised cash to 25% - as a result of trimming some stories and exiting others (Vistry I’m looking at you).

However after a quick audit, my mining segment has swelled to 46% of my overall portfolio. Partly because it’s done so well this year and partly because the other areas haven’t kept pace. Gold itself has been on a tremendous run with limited pullbacks and seemingly going higher every day.

I’m in no way calling a top in Gold here. However, GDX looks stretched - the daily RSI is almost as high as it has ever been and I wouldn’t be surprised for a short term breather.

The challenge with some of my mining plays, is that many are focused on incremental improvements - getting a permit, drill results, soil samples. All of which take time. Some have run well lately and I don’t want to exit them.

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Every financial metric is down year on year, and this is after taking into account the restatement of the one-off effects of the cost forecasting issue from last year.

Whilst the UK housing market remains a tough place, I don’t see this improving any time soon. Over the period I’ve held my Vistry, the macro environment for their sector has deteriorated, at least over a short-medium term horizon. Whilst some may argue that today’s numbers reflect previous guidance issued, I see them as confirmation that any immediate turnaround in this business is unlikely. If anything life is about to become harder for them, with constrained government finances, rate cuts perhaps becoming more difficult to justify, and affordability under pressure.

Aside from the macro, I feel there is pressure on their business model too. The bit that worries me the most is the margin compression as they are pivoting to a full partnership model. Standing now at just 3.5% on a reported basis, down nearly 50% year on year, this reinforces one of my main concerns with the partnership model - it’s a high volume, low margin business. Just without the high volume right now. Their ROCE also continues to drop, now to 9.6% despite in their original estimates this being a 20-30% ROCE business model. I am not convinced.

I have followed the story for several years. It’s come time for me to call this one a day and accept I got it wrong. I’ve sold 2/3 of my remaining position, leaving a c2% NAV position left, and will look to exit the remaining portion on any future strength.

So we’re definitely in a raging bull market right now! My YTD performance has just broken through the 20% mark after a few months of stagnation. Bearing in mind my portfolio is based in GBP this compares very favourably with the GBP rebased Nasdaq performance of 2% and S&P500 of 1% at the time of writing.

I’ve been making the most of the recent bullishness and increasing my overall cash position, which now stands at 28% having dropped as low at 10% in early April. In hindsight, I should have run a lower cash position over the last few months, and was too early in some of the harvesting, but I am not alone in thinking that. I would prefer to take a stance of prudence and amortise gains over a longer timeframe, and three months ago it didn’t feel like the time to go all in.

The most recent gains have mostly come from the mining side of my portfolio, also suggesting that the current sentiment is risk on. That side has now swelled to 32% of the overall portfolio, and the value segment is currently 36%. Given the high amount of cash I’m OK with this balance, in my mind it is still striking the right balance of risk/reward with a strong anchoring.

Looking at the value end of my portfolio, some positions have fared better than others.

There are two standouts in the last few months – Seaport Entertainment Group where my average entry is $18.55 and the close yesterday was $26.45 marking a 42% gain in a few months. I haven’t yet lightened up on any given the progress the business is making. On 18 August they announced a deal to sell 250 Water Street to a private developer for $150m. This is slightly lower than I had been expecting, but I think the deal being done and cash being realised has helped confirm the original investment thesis. They have made some positive moves in turning the business into a cash flow positive business excluding this sale, which would help support shareholder returns of this excess cash. SEG is now a 6.6% NAV position size for me.

The other ‘value’ position I hold that has contributed to the gains has been CATL. I managed to build a (small) position under HKD$300 just after IPO and it has subsequently run to $400 ish, again marking a gain of >30% in a short period of time. I wish I had bought more, it is a 2.7% NAV position size. I would add on any short term pullback as it’s a long term position that I want to be more material but I struggle to buy after such a strong quick run.

In the UK, both VTY and BME have been underwhelming, despite some goods news coming out of both. I continue to hold but did trim positions slightly on both following their earnings releases / trading updates in mid July. I think both remain cheap and have hopefully passed the inflection point for each. Moving forward initial signs are the newsflow is likely to be more positive and they should rebuild some momentum.

On the mining side, I have moved some positions around, really focusing on discovery stories that have high potential and near term catalysts, along with some more developed stories that just keep chugging along and getting better each day.

My three largest positions are now KBX, MPK and CCCM each being over 4% NAV. I will write at depth longer on each but all have some supportive near-term potential and offer in my opinion a very attractive risk/reward. Below that I have expanded to a basket of 13 juniors – mostly in copper or gold exploration. With gold prices remaining high, the majors have been moving which has started trickling down to the mid tiers as M&A activity is forecast to pick up. My view is supportive that this will continue to feed the smaller and smaller companies which are yet to move in any material way. As ever liquidity becomes a problem with all of these, hence the increase in numbers to a wider basket so individual equity liquidity is easier.

I have also now completely exited CCIR/KYIV which ran hard on the recent optimism of a ceasefire in Ukraine. I exited too early but took the short term gain for what it is and wanted to move on. I didn’t like the binary nature of it in the end and felt I would be better off finding quality than betting on any ceasefire, despite there being a real valuation backstop on it. At $15 it is very well priced in my opinion for where things stand currently, and I think offers a pretty even risk/reward now. Time to move on…

Arras Minerals represents an exciting way to play both a potential new discovery, alongside the early innings of a copper bull market, in one of the worlds cheapest jurisdictions for operating mines, a mining friendly government and population, and with some world class soil anomalies that are worthy of further exploration.

With a current market cap of C$125m and cash of C$18m, it’s neither overvalued for the opportunity nor short of cash. It is well funded to take the thesis through to discovery, with limited needs to return to the market.

It is also perfectly placed along the Lassonde curve – immediately post discovery and awaiting further confirmation drilling, and then reserve expansion.

We think it is quite unique and is our largest junior mining position today. The first drill results from this season should be released in the coming weeks and those could be a catalyst to really start moving the share price.

A high level overview of the Copper Market

It is widely regarded that copper is the commodity best positioned for investors to benefit from for the energy transition. It cannot be easily/cheaply substituted, is key in so many of the new incoming technologies alongside the general electrification of the world, and has an upcoming supply shortage/lack of a pipeline of new projects.

Surging Demand for Copper

· There are key areas driving demand for copper over the coming 5-10 year horizon, renewable energy, EVs, general grid expansion, and growth of data centres. For example a 1GW solar farm requires about 5,000 tonnes of copper and an EV requires 3-4x the copper of an ICE vehicle.

· Demand is expected to rise steadily, with estimates for global refined copper demand reaching 33 million tonnes by 2035, up from 23 million tonnes in 2024.

Structural Supply Challenges

· Major mining projects are maturing and more recent new large-scale discoveries have slowed down.

· The average ore grade is decreasing and has declined by approximately 40% since 1991, meaning more rock needs to be moved and processed resulting in higher costs

· Developing new copper mines can easily take 10-20 years, with many regulatory, environmental and societal hurdles to be overcome.

· Supply is expected to peak in 2030 with production falling by approximately 30% over the next decade.

· Supply is quite exposed geopolitically – with China representing approximately 45% of global refining capacity and just three countries; DRC, Peru and Chile, supplying almost 50% of copper ore.

A lot of this supply shortage has been driven by a decrease in investment into both exploration and development projects, as a result of a focus on ESG and short term returns. This tide has started to turn recently, however in our opinion, we are still very much in the early stages of this recovery and many decent projects are undervalued, underloved and therefore represent a compelling investment opportunity.

Source: IEA – Global Critical Minerals Outlook 2025

Costs to mine – not just about grades

Looking at where in the world is the cheapest to mine copper, whilst the grade of the ore is important it’s not the only factor to consider.

Favourable geology, low labour and energy costs, and by-product credits all help subsidise the cost of copper production. Once you include the above into the cash costs to mine copper, you may be surprised by the following;

• Kazakhstan: Mines operated by KAZ Minerals, such as Bozshakol and Aktogay, produce copper at some of the world’s lowest cash costs - reported as low as $0.95 per pound. Kazakhstan’s advantages include low fuel and electricity costs, open-pit mining, and efficient operations.

• Mexico and Peru: Southern Copper Corporation operates major mines like Buenavista del Cobre (Mexico) and Toquepala and Cuajone (Peru), with production costs around $1.03 per pound. Large-scale open-pit mining and by-product sales (such as molybdenum and silver) further reduce costs.

• Democratic Republic of the Congo (DRC): The Kamoa-Kakula mine, operated by Ivanhoe Mines, is recognized for exceptionally low production costs, thanks to very high ore grades (about 3.4%) and efficient underground mining techniques. The DRC’s overall site costs are the lowest in Africa and among the lowest globally, particularly when accounting for by-product revenue (notably cobalt).

• Chile: While not always the absolute lowest, Chile remains highly competitive due to its enormous reserves, advanced infrastructure, and skilled workforce. The Escondida mine, the world’s largest, is cited with costs around $1.40 per pound. By-product credits and economies of scale play an important role.

• Mauritania and Spain: Some individual mines operated by First Quantum Minerals, such as Guelb Moghrein in Mauritania and Las Cruces in Spain, are reported among the lowest-cost copper mines in recent industry surveys, driven by specific local conditions and infrastructure advantages.

Source: miningvisuals.com 2024

Kazakhstan – the new frontier in copper?

Kazakhstan opened up its mining industry through a comprehensive overhaul of its mining code, starting with the adoption of the Code on Subsoil and Subsoil Use (SSU Code) in 2018 and subsequent reforms. This transformation was designed to make the sector more transparent, efficient, and attractive to both domestic and foreign investors.

Key Features of Kazakhstan’s Mining Reform

• Adoption of International Models:

  • The new SSU Code drew heavily from Western Australia’s mining regulations, one of the world’s most investor-friendly frameworks. It introduced principles like “first come, first served” licensing and aligned reporting standards with international best practices (CRIRSCO/KAZRC).

• Simplified and Transparent Licensing:

  • The previous tender-based system, which was often slow and opaque, was replaced. Now, most new mining licenses are granted on a first come, first served basis. Only a few exceptions (such as previously identified areas or those near legacy operations) require tendering.

  • An online licensing platform (minerals.e-qazyna.kz) was launched in 2024 to further reduce bureaucracy and speed up processes. The platform grants access to geological data, license status, and an interactive map, making applications traceable and transparent.

• Open Access for Foreign Investors:

  • There are no significant barriers to foreign ownership of mining rights (excluding uranium deposits, which are reserved for the national atomic company Kazatomprom with possible minority foreign partnership). Both foreign and domestic parties undergo the same licensing process, provided they meet financial and technical capacity requirements.

• Expansion of Exploration Opportunities:

  • All regions have been opened up for exploration, with returned or new state-owned deposits auctioned transparently. This has encouraged small and junior mining companies as well as established majors to participate, boosting exploration activity.

• Digitization and Geological Data Access:

  • The creation of a National Geological Survey (NGS) in 2021 and the ongoing digitization of historical geological data have made it much easier for investors to assess potential projects, thereby reducing risks.

• Legal and Regulatory Security:

  • The SSU Code introduced more robust rights retention and dispute resolution mechanisms, modelled after international standards. Hold or retention statuses allow license holders flexibility when market conditions are difficult. The code also strengthened environmental assessment and introduced water management requirements to align with global best practices.

• Ongoing Updates and Incentives:

  • In recent years, further reforms have included digitalization, a large package of code amendments (over 100 in 2024), and tax incentives like the draft law for a tenfold reduction in mineral extraction tax for the processing of mining waste.

In summary, the country completely overhauled their entire mining industry since 2018, with a specific focus on making sure they are a country that people want to do business with, focusing on transparency and integrity (rare in many other countries with such geological potential yet to be tapped).

Arras Minerals – first mover advantage in Kaz?

Arras Minerals were early into Kazakhstan following the changes to the mining code in 2018, entering the country in 2021 and being the first Western listed copper focused junior to have ground here. After picking up a previously well-defined Copper-gold porphyry deposit called Beskauga, which gave them a foothold in the country, they quickly expanded their license areas to include some 3300km2 of land today, with Arras holding rights of 100% over everything except Beskauga (which they had the option to earn to).

In 2023 they agreed a deal with Teck Resources who committed to a spend of $5m on certain licenses by the end of 2025, with the option to then spend a further $47.5m per license to earn up to 75% per license.

Arras also retained several licenses for themselves, outside of the Teck deal. Of note the Elemes and Aimandai licenses are the ones we shall look at in this report.

Source: Arras Minerals Investor Presentation June 2025

Teck Licenses

We shall look at the Teck ground first, as to us this is the least interesting part of the Arras package for immediate value creation. Whilst the ground looks interesting, and Teck will effectively fund the exploration if there is a sniff of anything found, they will be left with 25% of any project found. With a MC today of C$125m they’re more than fully valued for this ground and where it is today. It is worth noting that any license not optioned and progressed after this initial $5m spend will revert back to Arras. In addition to this, Teck can only progress up to a maximum of 30% of their licensed areas with Arras retaining the rights to the remainder, along with all the data that Teck has funded. In effect Arras are progressing these licenses much faster than they would have otherwise.

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At first glance the numbers look encouraging - overall revenue growth yoy of 4.4% and LFL UK growth of 1.3%.

Now the LFL growth isn’t knock your socks off amazing given the tailwinds - good spring weather in the UK and Easter being in the period along with a relatively weak comparator - however it is positive and a clear turnaround from the previous update which had LFL trending negative.

FMCG LFL was negative which is a slight concern though the company states further improvements are still being made and performance more latterly has already improved.

Other concerns are gross margins ‘in some general merchandise’ categories are decreasing owing to average selling prices being under pressure, however again from Q2 these start to annualise out so won’t be an ongoing headwind.

The business is adding stores at it’s targeted rate and performance in France is also positive with LFL growth there of 1.1%.

Overall I see this as a positive release for the company. I picked up some shares on the morning sell off at 225p - basically re-buying what I sold a few weeks ago at 280p.

On the earnings call, a little disappointing it was pre-recorded but I understand the new CEO is new and only has had four weeks in the business. Everything he said about his time spent so far sounded reasonable with no immediate obvious insights. He did say a little about how he wishes to bring back some excitement and energy to B&M and make it more agile to help drive sales growth, which I found refreshing. A change from the somewhat lazy prior approach of just running 4 week pre-scripted sales campaigns.

I also like that he and others have been buying shares lately. Tjeerd picked up £500k worth in the 260-270p range mid June when he started. Enough to be meaningful.

AI generated earnings call transcript is below.

Executive Summary:

• Tjeerd Jegen, the new CEO with 30 years of business experience, joined B&M to strengthen the customer proposition and drive sustainable growth. His initial assessment indicates a solid foundation with opportunities for improvement, especially in operations and commercial aspects.

• Q1 financial performance showed positive trends: Group revenues increased by 4.4% to £1.4 billion, B&M UK revenues grew 4.7% with 1.3% like-for-like sales growth, and B&M France revenues increased by 7.6% with 1.1% like-for-like growth.

• Tjeerd Jegen outlined key strategic focus areas, including being more commercially astute, enhancing customer experience, simplifying the offer, and maintaining a disciplined approach to growth. A comprehensive plan for the business will be shared with the H1 update, along with guidance for the remainder of the year.

Meeting Notes:

Introduction of New CEO

• Tjeerd Jegen has 30 years of business experience, with 20 years in public companies and 10 years in private equity

• His background includes 50% in food businesses and 50% in non-food, with the last 10 years focused on value variety and discount retail

• Motivation for joining B&M:

  • To strengthen the group's customer proposition

  • Aim to bring back sustainable like-for-like growth and new store growth in the UK and continental Europe

  • Help customers save money on daily needs

• Initial impressions of the UK market:

  • One of the most competitive retail markets in the world

  • Sees it as a professional challenge to be successful in this market

Company Overview and Initial Assessment

• Tjeerd Jegen's observations after first four weeks:

  • B&M has a solid foundation and strong business fundamentals

  • Impressed with the commitment and passion of colleagues across stores, distribution centers, and support functions

  • Strong customer value proposition

  • Opportunities to strengthen the business, especially from operational and commercial perspectives

• Insights from store visits and operational reviews:

  • Worked in two B&M UK stores, receiving goods, stacking shelves, and working on checkouts

  • Reviewed DC processes and walked the floors of the largest DC

  • Visited the French operation and conducted a deep dive on the commercial approach

  • Spent time at Heron Foods business, meeting with the senior team and visiting stores

• Tjeerd Jegen's assessment: "We will make B&M a better place to shop and a better place to work"

• Plans to build a comprehensive plan to evolve and strengthen the business model, rather than revolutionize it

Q1 Financial Performance

Group Revenue

• Group revenues increased by 4.4% to £1.4 billion

• Growth driven by new stores, new space, and positive like-for-like performance in both B&M businesses

B&M UK Performance

• B&M UK delivered revenues of £1.1 billion, a 4.7% increase

• Like-for-like sales returned positive at 1.3%

• Positive performance mainly driven by:

  • Robust performance from general merchandise outdoor ranges

  • Benefited from drier weather, especially in April

  • Positive timing effect of Easter

• Sales values and units increased on both like-for-like and total basis

• Outdoor ranges, such as garden and do-it-yourself, performed well

• Improvements seen in health and beauty and cleaning categories following changes made in May

B&M France Performance

• B&M France revenues reached £136 million, a 7.6% increase

• Like-for-like sales up 1.1%

• Tjeerd Jegen encouraged about growth potential in France

• French stores look good and the brand is appealing more to French customers

Heron Foods Performance

• Heron Foods recorded a slight decrease of 0.4% in total revenues for the quarter

• Team working to improve aspects of execution

• Profitability remains significantly higher than three years ago

• Opened one store in Q1, focusing on improving like-for-like performance

Operational Updates

Store Openings and Closures

• 10 net new stores opened in the UK

• 4 new stores opened in France

• 8 B&M UK store closures in Q1:

  • 5 out of 8 closures were relocations

  • Closures driven by minimal cash contributions from these stores

  • Sales from closed stores often flow to existing stores in the area, improving overall profitability

• Tjeerd Jegen views closures as part of maintaining a healthy estate

Trading Margin Discussion

• Reduction in trading gross margin in Q1 due to:

  • Commercial decisions on seasonal ranges bought at lower margins

  • Lower pre-printed retail prices on many general merchandise products

• Outlook for improvement in the second half:

  • New seasons bought at higher margins

  • Positive effects from freight and FX rates

• Tjeerd Jegen's perspective on margin drivers:

  • Sales densities (volumes sold through each store)

  • Buying margin (retail price vs. buying price and buying efficiency)

  • Operating efficiencies, scale, and cost to serve

Strategy and Future Outlook

• Tjeerd Jegen sees significant opportunities to strengthen and evolve the business

• Focus on being more commercially astute, especially in B&M UK

• Plans to bring more energy and excitement to the customer experience

• Aims to simplify and strengthen the offer to customers

• Believes in maintaining a disciplined approach to growth:

  • Opening stores only in great locations for customers

  • Ensuring sound business cases with good payback

  • Focusing on margin-accretive growth for the whole estate

• Current store opening plans viewed as appropriate for now, but subject to future assessment

Q&A Session

• Dave McCarthy asked about the positive like-for-like sales:

  • Tjeerd Jegen clarified that about half of the 1.3% like-for-like growth was due to weather and calendar shift impacts

  • Acknowledged that underlying performance is still subdued

• On the topic of price strategy:

  • Tjeerd Jegen emphasized focusing on existing opportunities before considering price strategy changes

  • Suggested implementing a more agile promotional program to drive like-for-like sales

Management Alignment with Shareholders

• Tjeerd Jegen and other senior management team members have been buying shares

• Tjeerd Jegen views this as important for aligning management and shareholder interests

• Reflects the opportunity the management team sees for B&M's long-term prospects

Timeline for Long-term Plan Communication

• Tjeerd Jegen committed to transparency with shareholders

• Comprehensive plan for the business to be shared coinciding with the H1 update

• H1 update will also include guidance for the remainder of the year

• Plans for more direct engagement with investors and analysts in the future

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I am actually excited about the second half of this year, I feel the portfolio is well positioned with the key holdings being at or around their recent lows and all having one or more catalysts to unlock value over the next 6 months.

Looking into my largest individual holdings in more depth :

Cash - 26% ready to deploy upon finding new stories / market dip

VTY.L - 8.4% - sold off post government news on support for affordable housing. Trading update later this week, I am expecting some positivity from this as Persimmon have commented 2025 trading has been good. If the trading update is positive then I may add below 625p. Someone I met commented that there are a lot of American tourists in VTY which I think is correct. So any short term upside may be sold into. I still believe this offers a good risk reward over a 2-3 year horizon on the basis they or the UK government don’t ruin things. I think limited downside from here but plenty of upside.

Various pre vote SPACs - 8% - most of my position have very limited downsides but perhaps 10-20% upsides, more if there are any shenanigans going on.

ARK.V - 6.4% - Arras Minerals - a copper gold explorer based in Kazakhstan. I will be writing a deep dive on them shortly. SP has stabilised post raise awaiting the current drill results. I think they are more likely to have success than not but let’s see. End July might see the first drill results from this season being announced.

SEG - 5.2% - bouncing around $18-20. My average entry is $18.68. Story so far looks like it is evolving as planned. Awaiting a meaningful update from them.

CCIR - 4.6% - I sold in the $13s since first acquiring in the $11s but rebought too early at $12. Currently trading just under $11. I like the business they’re buying. Ukraine Russia war ending play. Sentiment at moment is very poor re war ending, so I think from here limited downside to trust value versus could easily be back in the 13s on any good news.

BME.L - 4.2% - sold off in June following disappointing financial statements from their interim CEO. New CEO just stepped in and will hopefully communicate the path ahead better than the CFO did. I am not adding yet, but they have a Q1 trading statement out on 15 July which may hopefully show a good start to trading in 2025 (which one would expect with the sunny weather in the UK in spring, and ongoing). Again I think the valuation is unstretched here and should have limited downside versus reasonable upside if they can show that trading has improved.

Of the remaining portfolio, in the mining space I added to SVM.AX, CCCM.V, KBX.V and KNB.AX during June. I sold 25% of my GLAD.V. Outside of mining I initiated a small 1.5% NAV position in AKW.PA which I’d look to build upon below €8 to a position size of 5% NAV. I also picked up some CATL on their HK listing below $300 to bring me to a 2.5% NAV size. I would add the same tranche again if it sells back there. All of my adds are up since adding which is refreshing!

Many may not have heard of Akwel – they are a small cap provider of car parts. However they have been in business for 50 years, operate across 36 sites, with 7 offices in 20 countries across 5 continents with nearly 9000 employees. They are still predominately family owned, with the founding Coutier family owning approx. 70% of the issued share capital.

Their current market cap is hovering around the €200m mark, and as at end of Q1 25 they had cash of €150m, current assets of €500m and total liabilities of €230m, making it a net-net. Also on their books is almost €300m of plant and property assets. A tangible book value of nearly €23/share whilst they’re trading around the €7.50-8.00 mark.

In addition to this, they’re profitable! In 2024 their full year EBITDA was €75m. Thus, at present, you can buy them for an EV/EBITDA multiple of less than 1.

So what’s up? Why are they so cheap. Is this a classic value trap?

Western Car Manufacturing – existential crisis

Well to start with we need to look at the macro to their industry. It doesn’t look pretty.

Most people have given up believing the western car manufacturing business can survive the transition to EVs and the cheap Chinese brands entering the space. Couple this with collapsing demand in the west (cost of living), tariff pressures (most likely resulting in yet lower demand), aging workforces who want to make things, tougher regulatory environments, and then the costs of restructuring to adapt – it doesn’t look pretty for the legacy manufacturers.

But wait, is this really going to happen? Do we really believe industry stalwarts like Stellantis and Ford will not exist in ten years time? I struggle with believing that will be allowed to happen.

Akwel

Akwel was founded over 50 years ago by three brothers of the Coutier family. The current CEO is Mathieu Coutier, representing the second generation of the family. He’s been in place for 10 years and with the company for 25. He has an engineering degree in plastics and has picked up a post graduate business Masters from Lyon Business School too. Overall I have faith that he knows what he’s doing. The board is comprised of multiple other family members, alongside industry professionals. I don’t have governance concerns.

The family still collectively own c70% of Akwel, with just over a third of the remaining 30% being owned by several funds who have been long term shareholders. Thus the tradeable free float is only about 20% of the issued share capital.

The company has long had a dividend policy which is currently 30c per year, or a yield of approx. 3.8% based on the current share price. This equates to approx. €8m a year, so well covered historically by earnings and cash flow. From what I can find out online, Akwel is still the primary source of the Coutier families wealth, and thus you would think they would be interested in ensuring it’s long term viability.

There is almost no brokerage coverage regarding Akwel and it seems to have dropped off most people’s radar. Liquidity is approx. €100k per day, not huge, but reasonable enough to build a position off. Given it’s had a rough three years, there may well be some disgruntled shareholders who will look to sell on any pop in price, so building a larger position may be very possible.

Akwel’s share price definitely tells a story of a cyclical industry facing it’s challenges. It was almost a 100x bagger from 2008 through 2017 but is down 75% since it peaked. Shares out have remained constant (with some small buybacks now finished). Across the last ten years, revenue has remained broadly flat (within ~20%), EBITDA has been consistently positive and FCF has mirrored EBITDA closely – showing the business does really make cash despite ongoing capex spend.

Recent trading has been tough – sales were down -7% yoy in 2024 and management have guided for approximately the same decline in 2025. Q1 trading wasn’t that bad, down -3% so perhaps there is some pessimism built in to that, but nonetheless this isn’t going to be a growth story for a while yet.

A decline of approx. 7% would yield earnings of approx. €20-40m for 2025, assuming net income margins in the past few years are maintained. There is also the settlement of an ongoing litigation claim with Stellantis, which has been resolved for €19m. The company has stated that this may be partially covered by insurance and will update the market as and when they know the final situation. Either way, 2025 looks a washout. They are holding approx. €150m of inventory and are in the position of tightening that somewhat, so FCF may be positive in 2025 despite limited cash generation through operations. Despite the weaker earnings, I don’t expect the dividend to be cut for both the FCF should be decent and there is sufficient cash on the balance sheet (!!) to cover it.

Akwel as a business sell to most major western car manufacturers, with Stellantis being their number one client representing about 40% of their revenue, and then Ford and Renault-Nissan-Mitsubishi making up another 35%. The top 10 clients contribute approx. 90% of revenue. Internationally about 30% of their sales are to the US, 40% to Europe and the rest diversified, with their Asia segment small but growing. Their revenue split across ICE vs EVs is hard to define as this isn’t something they publish, but I would estimate it to be approx. 75/25 split to ICE. A key revenue stream for them are fluid mgmt. systems which are obviously ICE based. A key risk for Akwel is very much this – their hero product is being evolved out, and they need to replace this with other secondary lines. However, none of this is ‘new news’ and they will no doubt have a plan to adapt. To me the question is whether the current valuation has written them off or whether they will survive.

Their release of the 2024 FY accounts has been delayed twice, which hasn’t helped their share price momentum. I think the reason behind this is in Nov 24 the US asked the Mexican government to investigate Akwel’s Juarez Mexican plant for a breach of the North American trade pact. In similar cases, this has boiled down to the local operator underpaying Mexican workers, which the US takes offence with as it harms US competitiveness. Those cases have been resolved by a minor pay rise given to the workers in Mexico (normally c10%). Thus the impact on Akwel, if this is the case, is likely limited. From what I can see, the sign off from the Mexican auditor is the reason for the delay. The company has stated this should have no material effect to the financial statements.

Finally, they were successful in divesting two property assets in Q1 2024 for approx. €6m, one in Argentina, one in France. It isn’t stated what their book value was, but looking at their quarterlies, it doesn’t look like it would have been a steep discount as book value changed by -€5m during this period (they may of course have purchased something else). This perhaps shows there is some real tangible value in their plant and property asset line which could well be recaptured if the business were to struggle.

Summary

· Akwel is a solid family owned and run business that has operated for over 50 years, profitably and across all continents. It is diversified across multiple customers and product lines though this could be improved

· It isn’t exposed solely to ICE or EVs so which ever way you think the speed of adoption goes they should still have a product base for that market.

· 2025 looks a washout with the litigation claim negating majority of their forecast earnings.

· The balance sheet is exceptionally strong – with them trading at 1/3 TBV and their MC being backed up by 75% cash.

· There are potentially some more skeletons – is the current litigation claim settled across all customers or is more to come out? What was the outcome of the alleged breach of the NA trade pact?

· Even in a worst case scenario of say the revenue halving the business should still make €25m a year, with a current EV of about 2x that.

· It feels to me as though they’ve been priced for failure, and I just don’t think it is that likely.

· I have taken a starter position in this of 1.5% NAV but will eagerly keep an eye on their delayed release of the 2024 FY accounts and any update re the skeletons either to further build or to exit.

Headline on the FT this morning.

Vistry, a company we have followed for a few years, first purchased late last year, and have been patiently waiting for the tide of sentiment to turn on it, should be the main benefactor from this sizable increase in government support for affordable housing in the UK.

A quick background to Vistry - they are a UK housebuilder, in transition currently to a ‘partnership’ model - working with local authorities and housing associations to build predominately affordable housing. This is a differentiator versus other UK housebuilders, who still operate in a traditional housebuilder model - acquire land, seek planning permission to build, build and then sell. A significant amount of capital is tied up in the process. Vistry are attempting to move to a strategy focused in the majority around working in JVs with the partner who provides the land and assists with expediting planning, with Vistry being the expert when it comes to construction.

The model fits well with the ambitions of the Labour government and the shares ran, probably ahead of themselves, during the early to mid 2024. However some issues with the rapid expansion plans and a previous merger, meant they overpaid for land in 2022/23 which came to light mid way through 2024. Shares sold off, more than halving in a short space of time. It’s been in the doldrums ever since, with the market not convinced management have the issues sorted, or the previous guidance of £800m pa of earnings is achievable in any near term scenario.

Nonetheless, if you work on the basis the issues of last year are past (and all indications so far announced to the market suggest they are) then the shares have been undervalued just based on their typical earnings of £400m pa. I saw the shares as a reasonable risk reward, in that you are probably going to get paid to wait for sentiment to recover, and then if anything with the partnerships model really comes to life, then the company should do well.

The spending review now marks £39bn of spending in Vistry’s sector where they are the market leader, over a period of 10 years. This is significantly higher than the £2.3bn per year the government has allocated over the last spending review towards affordable housing.

Whilst there is a long road ahead for Vistry shareholders, most notably a trading statement showing progress being made in the transition to the partnership model, and the problems of 2024 being definitely something of the past, today marks a good day for the company and perhaps sentiment has finally turned a corner.

I’ve been building a position in UK discount retailer B&M Retail since the start of this year with my average entry price being 284p. I’ve included an AI note summary of their FY25 earnings call which happened this morning. The shares are down 8% currently and I am considering my position (add, hold or sell).

The rationale behind my original purchasing is that the shares had simply become too cheap, with too much pessimism in the stock (trading had been reduced to 8x P/E, EV/EBITDA of 9x which for a growth business at what I think is a cyclical low seems ‘undemanding’). I like looking for turnaround businesses and had felt B&M could fair well.

Performance was tough during 2024 (their fiscal year 25) with like for like sales on a ~3% decline, the impact of which was mostly offset by increased number of stores. They have currently 775 ish stores with a view to add 45 more this year and their long term target in the UK is 1200 stores. The business has returned nearly a third of it’s current market cap to shareholders in the last 3 years. I am sure there are lots of articles already about B&M as an investment opportunity so I won’t repeat.

Factors I think that are supportive in the near to medium term :

• Trading update for Q1 FY26 in early July which I imagine should be supportive yoy as the UK has had a record sunny spring this year versus a wet one in the year before. Easter was late in both years so that shouldn’t affect yoy performance. I would expect to see LFL sales flat to positive. Also chance for new CEO to announce some good news.

• China excess inventory - still to be seen and they dodged it on the call but B&M are in the driving seat in negotiations with their suppliers to get costs down, or excess inventory on the cheap. This may be a short lived benefit but I could see this supporting gross margins this year.

• The growth in £50-100k income households shows a ‘moving down’ the food chain of UK consumers. I think conditions are likely to remain difficult in the UK for the majority of consumers, especially as the next 2 years are when a significant amount of mortgages on cheap rates need to be refinanced. So I expect B&M to continue to see this trend and benefit from it.

The main elephant in the room for me is the £75m of additional costs in FY26 owing to national insurance and minimum wage increases along with EPR packaging taxes and whether B&M are able to absorb that in their efficiency gains. I doubt they will be able to pass much on to the consumer.

So given the above I am going to continue to hold shares and see the trading statement in July for Q1 26. I am expecting that to show some improvement in LFL sales from Q4 2025 (-4.8%) and it should hopefully be flat or slightly positive and depending on their progress I may then look to add. If LFL continues to be soft then I will probably trim my position substantially or exit it.

Earnings call Summary:

• Analyst reported stable financial performance with Group adjusted EBITDA of £620 million and total revenue growth to £5.6 billion, despite a 3.1% decline in like-for-like sales; the company is implementing category resets and in-store execution improvements to drive future growth.

• Expansion continues with 45 new UK stores planned for 2026, 12 new stores in France, and a long-term target of 1,200 B&M UK stores; cost management initiatives are underway to address £75 million in near-term cost pressures for 2026.

• A new CEO (Tjeerd Jegen) will start in two weeks, bringing fresh international experience in grocery and general merchandise discount retail; the company maintains a strong balance sheet with conservative leverage and is progressing on a re-domicile process to simplify operations and provide flexibility for capital returns.

Meeting Notes:

Financial Performance Overview

• Group adjusted EBITDA before IFRS 16 was £620 million, up £4 million from the prior year

• Leverage ratio remains healthy at 1.26 times on a pre-IFRS 16 basis

• Final dividend proposed at 9.7 pence, bringing full year dividend to 15 pence per share (2% increase vs 2024)

• £2.1 billion cash returned to shareholders over the last five years, with £1 billion in the last three years post-COVID

• Cash generation over £300 million in the past year

• Group adjusted return on capital employed at 30.4%

• Total revenue growth to £5.6 billion in 2025

• Gross profit margin increased from 37.1% to 37.6% in 2025

• B&M UK Adjusted EBITDA stable at £545 million

• B&M France Adjusted EBITDA increased by £2 million to £48 million

• Heron Foods Adjusted EBITDA was £30 million, down from £35 million

Like-for-Like Sales Performance

• Like-for-like sales decreased by £119 million, a 3.1% full year decline

• Q4 underlying like-for-like sales were negative at -4.8%

• Underperformance attributed to external factors (no Easter, wet spring weather) and internal execution issues

• Management believes challenges are fixable and plans are being implemented

FMCG Category Performance

• Negative like-for-like performance in both value and volume across several FMCG categories

• Price and stock availability were in the right place during 2025

• In-store execution (space allocation, presentation, ranging) identified as the main cause for underperformance

• Actions implemented in Q1 2026 to drive like-for-like performance through volume growth

• Category resets undertaken, including:

  • Health and beauty: Full reset of visual merchandising standards, SKU consolidation, addition of trending product features and baby range

  • Cleaning: 25-30% increase in average per store linear space, growth in product groups, more exposure to volume lines

  • Food: Category relayed, blocked by subcategories, SKU count rationalized, volume point of sale introduced, incremental chillers added in larger stores

General Merchandise Category Performance

• Like-for-like volume growth observed

• Decline in like-for-like value due to lower average selling prices (ASPs)

• Proactive deflation of general merchandise price points from Q2 2025

• Categories such as homewares, DIY, indoor furniture, pet accessories, and household textiles saw ASP reductions

• Up to 5% ASP reduction in home categories, 2-3% in toys, electrical, and Christmas

• Plans to enhance ranges with higher price points while maintaining volume entry products

• Focus on good, better, best strategy to allow customers to trade up to more premium products

• Margin mix benefit observed in general merchandise category last year

• Higher margin categories, including seasonal items and toys, performed well

• Shift towards larger footprint stores allows for introduction of higher-priced items (e.g., £129 two-drawer wardrobe vs. £199 at market leader)

• Moving back into categories with good heritage, such as indoor furniture and cookware sets

Store Network Expansion

UK Store Expansion

• 45 gross new stores opened in 2025, translating to 36 net new stores

• 45 gross new stores planned for 2026

• Average payback for 2023-2025 openings continues to be sub 12 months

• Disciplined geographical distribution of new openings

• Long-term target of at least 1,200 B&M UK stores

International Expansion

• B&M France: 11 new store openings across the country

• New warehouse management system introduced in France, same as UK network

• Infrastructure upgrades to support future store rollout in France

• Heron Foods: 14 gross, 8 net new stores opened, with second half weighting

• France: Expecting around 12 new store openings in 2026

Supply Chain and Distribution Updates

• New Ellesmere Port import center opened to support ongoing growth

• Purpose: Provide efficient general merchandise stock-holding capacity upstream and enable greater productivity downstream

• At full strength, Ellesmere Port will receive circa 75% of total general merchandise container inbound volume

• Automation implemented, including auto pallet wrappers and auto unloading of containers

• New payroll and workforce management system implemented to monitor and manage hours more effectively

• Microlise transport system in final stages of implementation to optimize transfer operations

• New manual handling equipment fleet management system executed for DC operations

• Standardization of processes has reduced labor hours

• Management processes have led to reduced absenteeism

• Labor turnover has dropped from triple digits to low double digits

• Ongoing journey into automation, focusing on end-to-end processes in key elements of logistics network

Cost Management Initiatives

• Relentless operating cost discipline maintained in 2025

• Group operating costs increased by 7.2% year-on-year

• B&M UK costs increased by 8% to £1.1 million, primarily due to increased store estate and higher minimum wage

• B&M France underlying costs increased by 9.9% to £195 million

• Heron Foods operating costs increased by 3.1% to £144 million

• Near-term cost pressures in 2026 of £75 million in B&M UK being addressed

• Focus on spending as little as possible and maximizing efficiency from expenditures

• Investments in tools to make jobs easier for colleagues

• Efficiency improvements in buying processes, from factory gates to shelves

• Constant review of in-store activities to ensure they add value

• Shelf-ready packaging (SRP) implementation to improve efficiency

Product and Pricing Strategy

SKU Rationalization

• SKU consolidation undertaken in health and beauty range

• Food category SKU count rationalized

• Focus on improving shopability and ease of navigation for customers

• SKU rationalization across entire range, including general merchandise and FMCG

• Aim to offer credible choice without adding duplication or complexity

• Balancing act between offering choice and avoiding customer confusion

Pricing and Value Positioning

• Price gap remains unchanged at 15-20% to grocers on a post-loyalty basis

• External benchmarking business enlisted to provide additional assurance on price comparisons

• Value perception remains strong according to YouGov price perception data

• General merchandise price gap typically greater than FMCG, at least 20% against industry benchmark

• Focus on maintaining 20% discount versus benchmark pricing in the sector

• Commitment to giving back value to customers as a core part of the discounter model

Customer Trends and Demographics

• 65% of customer base sits in annual credit turnover bracket of £40K and below

• Broad appeal noted, with greatest market share gains in Q4 for general merchandise in the £50K to £100K credit turnover profile

• Growing trend of celebrity shoppers reported in media

• 58% of sales driven by FMCG, lower than traditional grocers and discount competitors

• 5 out of top 10 footfall driving categories are in general merchandise

Balance Sheet and Capital Allocation

• Robust balance sheet with conservative leverage

• Long-dated debt maturities

• Financial flexibility maintained

• Capital light business model supports continued excess cash generation

• Re-domicile process progressing, focused on Jersey, expected to complete within the calendar year

• Re-domicile will simplify processes, reduce operating costs, and provide flexibility for capital returns including buybacks

• Reduced levels of leverage within the business overall in recent years

• Maintaining a low level of debt considered efficient from a cost of capital perspective

• Additional bond put in place in November last year, completing the program of extending maturities

• Comfortable with the current long-term capital structure

Outlook and Guidance

• Management not providing specific guidance at this early stage of the year

• Analyst consensus for adjusted EBITDA noted at £621 million, with a wide range

• Significant cost pressures acknowledged for 2026, particularly £75 million in additional costs for B&M UK

• Company aims to offset cost increases and pass on as little as possible to customers

• 12-13% EBITDA margin range may be challenging in the near term due to cost pressures

• Company to provide more specific outlook range alongside interim results

• Planning for positive like-for-like growth in the business

Leadership Transition

• New CEO (Tjeerd) to start in two weeks

• Initial focus on getting to know the business and completing induction

• No indication of major profit or price resets under new leadership

• Strategic outlook to be discussed further once new CEO is in place

• Tjeerd brings experience from various international markets, including grocery and general merchandise in the discount retail segment

• Expected to bring a fresh perspective on the UK market

• Will likely engage with the entire business and hear views from various stakeholders

It’s been a solid year for us so far. Overall the portfolio is up 15.5% YTD as shown below. We’ve spent most of the year with c30% in cash which has been deployed in and out of the market on multiple occasions to good effect.

We noted in February this was becoming a traders market, and have thus quite radically changed our portfolio construction to better accommodate that space.

As we have talked about before, we like running a so called ‘barbell’ portfolio.

This is typically 70-80% of our exposure deployed into large cap, liquid stocks that are defensive in nature (e.g. yield a reasonable dividend, trade at or below book value) and the remainder of our exposure in higher risk, generally natural resource, stocks. We spend a lot of our time focusing on these and only hold a basket currently of 8 junior mining stocks (excluding warrants). We have been spending our time and energy focusing on stories that have sizeable upside, limited downside and with near term exploration potential. The thinking being that if we do our job well, we may get 1 or 2 winners who 5-10x, a few that go nowhere, and a couple that may drop 50% (or less if we are clever with our exit strategies). The challenge is very much liquidity in some of these names, with an exit impossible to achieve at any scale (hence one reason for diversification, and also limiting the allocation of the barbell to a small % of the overall portfolio).

The general thinking is that the higher risk end of our barbell will generate the excess returns, whilst the ‘anchor’ of the heavier stocks allows for some defensive returns. Overall we are aiming for an annual portfolio return of 15-20%.

Given the strong start to this year, we are now in a position of luxury - it’s still May and we’re up our target YTD and if we went entirely to cash we’d end the year up nearly 20%. We have thus been raising cash in the last week, we are now at 25% from a low a few weeks ago of about 15%. Of the remaining portfolio, we are actively trading around a handful of selected SPACs that are still backed by trust value, and these represent a further 10% of the portfolio. So in reality we are probably something like 35% in cash, or cash type investments.

With regards to the defensive part of our barbell, we are focused currently on 6-7 names with a few starter positions elsewhere. Whilst we do hold a few US positions, we have 4x sizeable LSE positions and are building a Euronext Paris position currently. We are probably about 25% deployed to the UK - perhaps overweight but I see value in a lot of places here. I am quite excited to spend some time over the summer sieving through the European markets to try and find some value that others haven’t seen yet.

Elsewhere in mining, it’s been a busy 5 months - lots of travel, lots of meetings and a couple of site visits. I will write shortly regarding our largest current junior mining position which we visited in May.

Our performance to year end in public markets was broadly flat to up slightly for 2024 giving a total return since inception of c10x across five years. Our private market investments however continued to outperform and have beaten expectations we held at the start of 2024. Given these mostly comprise small illiquid UK private co's it's hard to 'mark to market' but suffice to say each company has grown it's net assets year on year and thrown off a little cash as well.

This reset meant that I missed much of the post Trump run up (or run down depending which sector you're looking at) but I took the sell off in Dec to recommence some positions.

Our public market investments since have been largely refocused using a barbell strategy - with one end being investments in mid-large caps with lots of liquidity that offer limited downside, plus reasonable upside alongside a healthy dividend, paired with some very high risk investments (typically in junior explorers) that could each easily 10x or go to zero. The current weighting is perhaps 75% low risk and 10-15% high risk, with the remainder in cash waiting to be deployed to high risk options when they become available. I would say this is a somewhat defensive strategy going into 2025 as I don't like what the outlook looks like (MSTR trading at 3.5x underlying BTC holdings says we're in silly town again). I've tried to find the high risk investments that still have some downside protection although this isn't always possible. Examples of current holdings in this space include Sitka Gold (perhaps less risky now than in January 2024), Sintana Energy (again perhaps less risky by the day), Awale Resources (somewhat downside protected), Infini Resources (super high risk), Kobrea Exploration (ditto), Electrum Discovery (ditto), Challenger Energy (ditto). I generally deploy 1-3% of the portfolio to these, and let them run, only trimming if the story starts maturing (otherwise it defeats the point of the barbell). There are a couple of other explorers I'm following that may be included at full size if the opportunity arises and a couple of starter positions.

On the other end of the barbell are stalwarts in the CI portfolio like YCA, SFL, GCP, CTM and SVM, and newer entrants like the CAC40, IWM, NKE, and VTY, and of course cash. Each of these is 5-10% of the overall portfolio value. I do trade these around depending on if they spike/sell off or if the thesis to each changes, but aim to limit individual exposure to each to 10% at most.

Outside of public markets, as mentioned we've been active in finding private opportunities to generate cash flow and/or provide upside on any exit event. Whilst we are yet to achieve an exit on any of these they are all generating cash flow and growing net assets at a reasonable rate without requiring too much attention. We are eagerly working on a few ideas focused in natural resources which we hope will get off the ground in H1 2025.

So all in all 2024 was a year to reset and review strategy. I feel like a lot of heavy lifting was done Aug-Dec 24 and the portfolio is now well positioned for a solid 2025 with limited downside and tons of upside. It has also been positioned to hopefully not require too much intervention which allows me to focus on new avenues.

Here's to a good 2025 for everyone reading!

Yukon

I was lucky to be invited on the Yukon Mining Alliance site tours during June, and visited the sites of 8 juniors and met with a few others. I will write separately regarding a few of the most interesting (in my opinion at least!) stories there.

Uranium

As mentioned before, I am now mostly out of the uranium miner equities. My presentation at the conference in London was actually a pair trade within the sector, shorting Boss and Paladin and going long NXE and DNN. This was primarily due to disjointed valuations based on their primary projects. Whilst I felt the Canadian names were realistically valued, the Australians were trading at 2-3x the Canadians, based on projected cash flows modeled at the same U price. This valuation discrepancy has been trending together over time, however now that U prices are at or near equilibrium pricing, there is no logical reason for the gap to continue to exist. Since I wrote the article (mid May) the Australian equities are each off 25-30% whilst the Canadians are flat. I'm now suggesting to close the trade as it has moved substantially in a short space of time, but the longer term argument is still valid, and they should be monitored for another opportunity to launch the same trade.

Elsewhere in Uranium land I have now re-established a full position in physical uranium, as I believe the risk/reward is now offering asymmetry again. If you recall I left this position on 8th February when U prices weren't far off their peak of $106/lb. Now that spot prices are back into a more normal arena and have shown support around the $85/lb mark, along with the fact that YCA.L has been trading at a c15% discount to NAV, you can pick up U via Yellowcake at around the $73/lb mark, substantially less than the closing June term price of $79/lb. My YCA position is 15% of my portfolio, with an average cost base of £5.80/share. I am not expecting fireworks immediately, however there remains substantial supply risk and I'd prefer to be in the game at this point of the cycle than on the sidelines watching. The news of the increased tax charges out of Kazakhstan has given me the confidence to fully re-establish the position.

First Pacific

I have initiated an 8% position in First Pacific, trading on the SEHK. They are trading at stupidly low multiples of EBITDA, having sold off along with every other HK stock. However they are somewhat unique in that all of their custom comes outside of China/Taiwan so I think they should survive any issues that may arise there. In addition, they conservatively value their individual holdings, with multiple analysts feeling there is substantial upside if these were valued at open market rates. Whilst I don't see any immediate catalyst helping unlock that discount, I do like buying things when they're half price, it helps underpin the current valuation and gives plenty of upside should things go well. It's hopefully a position to put to the back of the portfolio, forget about and review in a few years time.

GCP

GCP has performed well and is up c10% since I started my position. I think with a softening rate picture it should continue to re-rate and I'm expecting an approx 50% return on my position within a 12-18 month period.

Sintana Energy

I have been playing around with Sintana Energy and Galp Energia for a couple of months too. The common theme is their offshore Namibia oil field discovery called Mopane. This is a highly prospective discovery and Galp are currently looking for a farm in partner to help develop it. There should be plenty of news flow upcoming and Sintana has some other licenses in the same area that should start seeing drilling later this year. I think there is definitely some asymmetry with Sintana, and Galp should continue to see support around the 18-19 euro mark. I don't particularly like the insider selling at Sintana, though it appears to have now abated and the directors concerned still hold the vast majority of their holdings. My conservative estimates for Sintana based on Mopane alone suggest a share price of C$1.70-2.00. If they have any success with the other licenses, we could easily see $4-5 a share by end 2025. Sintana and Galp are both a 5% position size for me currently.

Other plays

I have taken a small starter position in Nat Gas ahead of what I expect to be a cold European winter. For the moment this shall remain a purely speculative play, but I see more chance of upside than downside at present. I have also bought several sector ETFs for a trade recently - I'm long France, Mexico and Argentina. I don't see any of these being long term holds but for each their own reason I think there is short term upside to be had. I also had success with the NTR/MOS pair trade, which recombined correlation and I exited at a healthy 40% profit within 5 weeks. I will continue to monitor this pair to reinitiate the position if the market allows. I continue to look at MSTR/BTC too, but the market isn't being kind and it's not the time to re-enter this one yet. MSTR just announced a 10-1 stock split which will support their equity for the moment so one to keep an eye on but no planned action currently.

NTR/MOS recombining after a short separation.

So it's been a fairly active period since April for investing here. We have radically overhauled the portfolio with some major changes as we didn't like how things have been developing in various markets. We are up YTD 11.2% which is broadly in line with the major US indices, the Nasdaq up 13% and S&P500 up 12%. This is a tad frustrating given we feel we have managed risk much tighter and are invested in stories that have a good future potential and we don't feel we're buying the top, which seemingly remains a risk with the US indices.

Anyway, we are now sitting on 30-35% cash which tells you where we feel comfortable right now. Earning 5% on a chunk of the portfolio without much risk sounds good.

Our key other positions are now Noble NE which is our largest single holding around 12% our portfolio, which we have managed to enter in the recent pull back. We also hold reasonable position sizes of ~8-10% in Vale, SFL and GCP.L. Vale has been beaten up recently and we see a slightly improving picture ahead. SFL we have held since 2020 purchasing in the 7s and 8s. It's now in the 14s and has paid $1 a year in dividends, so has done incredibly well for a relatively boring equity. We have just trimmed 1/4 of the position but are happy to continue to hold the rest. GCP is a new entrant for us, trading at a sizeable discount to NAV (~30%). We have felt this story is now a touch better than UK Housebuilders as a rate play, with expectations for higher for longer and with the UK economy finding life tough, so we have effectively rotated out of housebuilders into this, taking our 40% gain there.

We have entered the met coal space, with 5% positions in AMR and HCC which both have strong support over a multi year horizon, and met coal looks interesting right now. We have been building upon our mix of junior miners, both in gold and outside, now holding reasonable positions in Sitka Gold (SIG), Luca, Banyan (BYN) and Awale Resources. We also own Fireweed Metals (FWZ) and are excited about the changes there and what that may bring to the project, along with Sovereign Metals and Centaurus, the positions of which have been vastly increased in recent months. Prices have run a bit on all of these and if they come back we have plenty of cash to deploy. This leaves a few legacy positions waiting on the right moment to exit from along with some opportunistic trading as and when markets allow.

The big exit for us since we last wrote was the MSTR / BTC pair trade. This was a frustrating trade from the outset, with the volatility in MSTR being hard to stomach. We didn't like how it traded and exited at a small loss when it's premium to underlying NAV broke 80%. It has subsequently risen to a 125% premium, which is starting to get tempting to re-enter the trade on, however with the recent Gamestop / AMC pump we're going to sit on our hands for a while yet, but will keep a close eye on it for the right time to re-enter. Sentiment needs to shift to be more negative after a very position 4 weeks. In the meantime we have another pair trade on currently which is long MOS and short NTR. They correlate historically very tightly and have recently diverged with the increase in fert prices with MOS being left behind. We're not experts on wheat so have taken the pair trade instead of long MOS in case fert prices soften again.

Exiting the MSTR / BTC pair trade. Doesn't look yet like the time to re-enter.

The NTR / MOS pair - no apparent reason for the recent spike.

Short MSTR and Long Bitcoin

This could be seen as being plain stupid, trying to bet against the moronic crowds, but I see absolutely no reason for the current premium that MSTR has to being sustainable over the long term. If we look at statistical premiums since MSTR pivoted their business model to acquiring BTC we are almost 3 standard deviations outside of their historic premiums to NAV.

The basis of the trade is that MSTR is simply now a BTC holding machine. Its legacy business is fairly valued at approx $1.5bn (on the generous side) but its EV is now c$33bn (depending on how you treat the converts) i.e. its legacy business now contributes less than 5%. As per the most recent raise they hold 214,426 BTC, so you're paying approx $154k per BTC. At current market prices today of $66k this represents a premium to NAV of about 133%. Given the plethora of cheap liquid BTC ETFs now on the market with effectively zero premiums, I don't see why MSTR can sustain such a premium. It is simply a buy and hold vehicle that has stated it won't sell BTC and will intelligently issue equity or debt to raise funds when it is trading at a high premium to acquire more BTC in an accretive fashion to its shareholders. Perhaps there is some value there, if this was done sensibly. However the more aggressively they do this, in effect they will reduce the premium naturally so it is somewhat self-correcting in my opinion. If we compare the vehicle to another I know well, in another industry, that has exactly the same mandate, one finds that that vehicle typically trades at a discount to NAV, not a premium. I'm referring to Yellowcake PLC (YCA.LSE). I appreciate the upside in Uranium is perhaps less now than in BTC but that wasn't the case a couple of years ago, and discount to NAV in YCA typically bottomed out at about 20% on any given swing. YCA has rarely traded at a premium, only really when it was launched and in the autumn of 2021 and even then only a (relatively) small premium of 10-20% and for very short periods (i.e. days or weeks, not months or years). Logic states that MSTR will trade back down towards NAV (or near NAV whilst BTC is still appreciating).

So I've gone long BTC and short MSTR on the basis this premium will erode over time. The last time MSTR had a sizeable premium (over 100%) was in the last BTC bull of 2021. It got to c300% albeit very temporarily. Interestingly, the premium topped out on 9 Feb 21 whilst BTC topped out (initially) two months later. The premium was back to historic norms (still 30-40%) within a month. It did trade at a discount in early summer of 2022, which further supports the thesis.

Now basing a trade on something rational happening in the crypto space is playing with fire. Things could get much more illogical before they get more normal. I have therefore entered with an appropriately sized position, such that if the premiums blew out to 300% like in 2021 it doesn't come close to blowing my account up. In fact if premiums went to 300% I would have sufficient liquidity to increase the position by a sizeable amount. What's the return - if MSTR were to return to normal premiums to NAV (say 30%) then the trade should return >50%. I've been waiting patiently to get this trade off with the right risk reward, and trying to minimise the chance of a quick peak to 300%. Looking at MSTR on the hourly, 4 hourly and daily charts as of yesterday they're all showing a potential H&S pattern, with a declining RSI on the H, suggesting short term downside for MSTR, and perhaps the normalisation of this premium. Let's see how things play out over the coming weeks.

Disclaimer - this hopefully goes without saying but this kind of trade can blow an account and I am not recommending anybody follow me on this. I am simply sharing what I am doing, as much as myself to look back on later. I am no financial advisor and I have no understanding of your own risk profile and experience. Do your own due diligence.

From a technical perspective things are looking much healthier than they were when I exited. I think there is a chance of some modest further falls in price, as well as a few months of chop at these levels to gain support of the 200DMA, but there is a chance it'll rebound quickly. I will look to build on my 6% position in physical over the coming weeks should prices stabilise further.

As of writing (14 Feb) the YTD portfolio performance is up 6.0%, which is a good start albeit somewhat retrenched from a peak of 8.81% on 2nd Feb.

Changes:

Uranium

Following the Cameco earnings call on 8th Feb I sold a substantial amount of my uranium holdings at market open. The sector had overrun in recent months, with most forgetting that only in June prices were at $60/lb. Whilst I am still a short to medium-term bull, sector sentiment has gotten way too bullish. Cameco reminded the market quite loudly that they have a significant amount of reserves that could come online relatively quickly, they announced extension plans of Cigar Lake (most analysts had been working off Cigar Lake being shuttered in 2028) and confirmed they are producing lbs, mostly as expected, at McArthur River, again with some analysts highlighting potential difficulties in the ramp back up again. I saw the earnings call as needed water to douse the flames of overly high expectations of the sector being on one consistent trajectory straight up with no time for consolidation/reflection. I think the market is now likely to sit and reflect on the massive recent run in the spot price, which had exceeded long term pricing by almost $40/lb. Either spot will hover where it is and long term rates will come up to meet, or spot prices will come down to be closer to long term pricing. There is of course a small chance spot will not pause and just run, but I see that as an outside risk, and one I'm prepared to take given the immediate term downside risk is 25%. I will look to re-enter the trade (and it is now a trade, not an investment, prices are at incentive levels now) once spot is within $20/lb of long term pricing. Obviously there are some sizeable discounts with U.UN and YCA to consider, which may make this quite a short period on the sidelines. If spot runs without a proper pullback/consolidation then I am still happy with my current uranium position, what is left in my portfolio (now a total 8% position) is explorers with huge torque to a higher for longer U price. My return as of today in the uranium space since I entered in 2018 has been 775%, which has beaten my initial target of 500% (and probably the timeframe if I'm being honest) so I remain very pleased with the returns. I think it's too early to look to initiate outright short positions, but various Australian equities are valued at quite different levels to US/CAN plays, which leads one to consider a pair trade. However this disconnect has existed for several years, and at the moment I don't see a catalyst for the variance in valuations to be reduced so I'm keeping funds in cash. However, if the sector runs like lithium did then I will aggressively look to initiate short positions on mostly Oz equities.

More widely:

I have been selling through a portion of other holdings, mostly downsizing and I'm now sitting at 30% cash. I'm taking some money off the table after a strong run since September across all markets, and I expect the news flow to be more negative in the next few months than positive. I've also entered into a 4% (non-notional) short via OTM leaps on NVDA. The run in NVDA has left all reasonable forms of valuing a business a long way behind, and I think it is inevitable that a collapse in the share price will happen. What will be the catalyst, I'm not sure, which is why I'm being sensible with position sizing and timeframes on the leaps. Most expiry dates are Dec 26, so I have nearly 3 full years for the thesis to work out. I should get a 3-7x multiple on the premiums paid should it play out how I expect it to (a reversion to average multiples for a static hardware business). I may well be early, but I am happy to continue to roll this position forward until it pays off.

It's been an interesting year, starting well, having a very flat and boring spring, and then finishing strong.

Our consolidated portfolio performance finished up 30.0% which is a slight beat on the S&P 500 which came in at 24% up. However, the S&P 500 is only up following the strong performance of its 7 largest entries, all of which could easily be argued are overvalued on pretty much any metric and represent significant downside risk.

If we take away the big seven, then the "S&P 493" had a much smaller gain of 6% during 2023. Given the purpose of our portfolio is to protect against declines whilst providing asymmetrical upside potential, we feel that a return of ~30% versus an essentially flat, but in our view riskier, market is a good return and continues the strong performance we have produced since 1 January 2020.

The "S&P 493" this year versus the full index

Our portfolio now has achieved a cumulative return of 936% since 1 Jan 2020, or an annualised return of 79% across a period of 4 years. The smaller returns in 2022 of 36% and 2023 of 30% reflect a reduction in risk appetite during this period compared to 2020 and 2021, although have still produced outsized returns, so overall I am happy with the progress and "maturing" of the portfolio.

This year has been one of searching for new themes, whilst old ones mature.

Uranium We have remained invested in uranium, though we exited most general equities during late 2021 - early 2022, but kept a position in physical via both U.UN and YCA.L. During late 2022 and early 2023 we recommenced some positions in juniors wherever we saw value. Some of those have now been partially exited in the recent run-up. But we have generally been moving profits from equities to increasing our position in physical, letting that run. Our feeling is that there is further upside to come in physical, however equities need to see a sustained spot price to maintain their current levels, outside of a few exploration stories. We think we may see spot uranium prices peaking mid-late 2024, and we are expecting some detachment from the physical vehicles to spot. We believe this has started showing already with YCA.L maintaining a greater than 10% discount in this run and U.UN often having a 5-10% discount. Any spike in spot may see those discounts widening. We have our exit strategy that was laid out in 2019 which we are sticking to. We are happy if that means we leave some money on the table for someone else, our returns more than compensate for not calling the precise top.

UK Housebuilders A new theme for us that opened up during 2022 is UK housebuilders. Equities were down >50% from their 2021 peaks and despite a rising rate environment, we felt that the market had overly compensated. Some of these have large land banks that in a tight development market like the UK are not easily reproducible. It had gotten to the point where the equities were trading for less than their land value, which even in a 'higher for longer' rate climate, seemed overly punitive. Having commenced positions in late 2022 and continuing to add on weakness during 2023 this theme has become a ~15% portfolio position for us, spread across key equities. With a return thus far of c15% we feel we are through the worst and there is plenty of upside remaining. We will add a final tranche on any future dip taking our portfolio exposure to 20%, if the market allows.

Other value plays

We have been building positions in a few various value plays during late 2022 and into 2023. We have increased exposure to BATS.L and IMB.L with the belief both companies are currently priced like they only have a few years of profitable trading left, and we have continued to add to both through 2023. We see both beating expectations over time and expect this position to reward us over a period of 5 years.

We also like the central and eastern Europe fund, CEE, which is a sleeping giant in our opinion. They hold a large amount of locally converted ADRs in various Russian equities, that are currently on their books at 0 value. We don't believe the current sanctions will hold indefinitely, and we are confident some mutual trading of positions will be allowed in the not-so-distant future. If you apply their book value (i.e. full Moscow value) then CEE would have a NAV of >$20 per share, i.e. more than double. Even applying a 50% discount to the Russian assets, after Putin has taken his slice, it has a NAV of $15, i.e. a 50% return. We believe we'll see an agreement to swap assets prior to end of 2024, so that's a healthy annualised return. The downside - the fund otherwise is mostly invested in reasonable dividend paying companies based in value countries like Poland and Hungary, so even forgetting the Russian assets, it's still interesting, and with limited downside risks.

Other commodities

We have been increasing exposure tentatively into other sectors in the commodities space as prices come back to Earth. We like gold miners here, with the metal near/at all time highs yet with miners down 50-90% from their recent peaks. Whilst things were bubbly three years ago, the market has been brutal for many decent companies that are now available on sale. We are still building positions but at present there are many that are offering value for money.

Shorts We believe remaining hedged in an environment where there are plenty of large assets are historically high valuations is wise. At present our hedges are primarily against NVDA - with a variety of LEAPS out into 2025 and beyond at strike prices of between 225 and 325. Time will tell whether they'll pay off, but we sleep better knowing we have some downside protection.

Pair trades With returns harder to find, we have had to work a little harder this year to generate alpha. We have enjoyed two successful pair trades which have now both been exited. Firstly we noticed a disconnect between WHC and NHC. We went long WHC and short NHC. News flow helped close the gap faster than we had imagined. Another was the disparity between BDRY and a basket of dry bulk shipping companies. The equities had held up much better than should have been the case given the collapse in capesize rates. Long BDRY and short the equities. Well capesizes nearly doubled in the space of a few weeks in Nov/early Dec and provided a short term exit from this pair trade, with a yield over 100% in a few months. We believe should capesize rates normalise in early Jan/Feb there is a chance to re-establish this trade.

WHC vs NHC over two years, nice gap opened up that was promptly closed.

Basket of dry bulk co's vs BDRY index - disconnect to reduce

Looking into 2024, what's on our radar? We expect to see a continuation of rising uranium prices, perhaps culminating in a peak next year. Let's not forget that ultimately this market is balanced at $85/lb uranium, and spot is there as of writing. With limited new production hitting the market pre 2027/2028 we see pricing having to go to the margins. What is a utility prepared to pay to secure supply? We believe this is why equities have stalled and spot continued to run, as most serious money knows the market is in equilibrium at $80 U which is already priced into the equities. With contracting taking place a few years out, next year or 2025 should mark the peak in marginal pricing. With supportive U prices, a lot of production will come on which will no doubt soften prices further out on the curve. So if we're going to see a spike, in our opinion this is likely in 2024/5.

We are watching closely the commercial real estate market, and whilst perhaps the best bargains are behind us, we think this sector is going to take longer to turn around than many are pricing in currently, and we may see a dip again during 2024 as shorter-term investors rotate out.

Whatever else we look at, we are staying away from growth and remain focused on value.

Here's to a good 2023 and looking forward to whatever 2024 may bring,

Ben Fillmore

Unless you've been under a rock the world has woken up to the problems created by a rapidly increasing rate environment. The big question remains what happens when rates are suppressed in an inflationary environment?

Our portfolio is now back down to 1.7% up YTD, at least still positive, and tracking the S&P 500. However we have been buyers in the last few sessions, notably deploying 7% of our cash yesterday (15th March) and are now down to 19% cash. Some of this is short term focussed, however we have also started taking some positions in longer term plays where the risk/reward has become asymmetric.

Of note, we took a reasonable starter position in EWZ leaps, two years out and slightly OTM at present. Whilst we are currently paying for a chunk of implied volatility in these, the position is relatively small and we will look to add to those if valuations remain subdued as the volatility comes off.

Likewise we have initiated a position in KRE. Now this could be premature, but it does seem like a lot of negativity is now priced in. Valuations are off nearly 50% on a basket of US regional banks, which seems hard to believe the entire sector will remain so suppressed. We have created a synthetic long position here on the leaps, with some protection to the downside and helping to balance the current high implied volatility. Again taking a two year view here.

Other trades include selling 10% OTM short dated calls on GDXJ as I think this first wave will fade (to be clear, these have been sold against a basket of juniors we hold for the longer term). We have also sold 25% OTM puts in URNM (strike of 22.5) which we'd happily be buyers of should the index get there.

Others longs include adds to PBR.A, BATS, IMB, YCA, U.UN, FUU, ECOR, re-initiated a long in BAS, and recommencing positions in ISO, UUUU, FCU, WUC. Many of these are smaller adds with a view to continue to build the position if prices continue southward. Other areas on our radar are increasing positions in UK Housebuilders, recommencing positions in WHC and YAL, and initiating positions in some selected consumer staples. However we remain agnostic to sector should value become readily available.

It should be an interesting few months ahead.

A cautionary note - if it isn't clear the positions above are in funds controlled by us and are in no way a recommendation to anyone.

We've been quite busy reorganising the portfolio this year, taking some time to reposition ourselves cleverly and making the most of the positive sentiment in the market. We have exited our positions in BASF and Heidelberg Cement, clocking a return of 22% and 39% respectively over a 5 month period. We were fortunate to exit BASF ahead of its earnings call. I see valuations no longer being the absolute steal they were in late summer and now reflect probably an optimistic view of the European energy situation. Europe was lucky this winter to avoid the worst of the predictions, but the structural problems remain, and without any rapid improvement in the Russia/Ukraine conflict, I see gas and coal recommencing their rise in early summer putting pressure on these stocks. I may have exited a touch early, but I felt the risk/reward was now more balanced and it's always sensible to book respectable gains when the outlook is still so uncertain.

We are now holding more like 40% in cash (actually mostly T bills accruing a healthy 5% pa) ready for things to soften a little in the coming months. We opened and closed some short dated OTM put options in GDXJ for a 300% gain in a month as the index had become rather overbought which has now corrected itself. We have also added an AAPL Aug 23 bear put spread which is up 20% so far. We continue to hold this position but will look to exit the trade on any bounce. We utilise these options as hedges to market volatility which we are expecting to continue to through 2023.

With regards to Uranium we have been continuing to add to our position in F3 Uranium on weakness and are encouraged by the recent step out results they have published. We have also been continuing to migrate our U.UN position to YCA as and when the discounts to NAV have allowed. This has proven profitable so far. Much more recently we have reopened a position with ISO Energy with the view there are several catalysts ahead in 2023 which could be supportive of their valuation. We were also due to participate in the infamous GLO financing, which has regrettably been postponed for the moment pending some legal action in Niger. We hope to be able to participate in their next raise and in the meantime will be adding to our position in the open market.

In other themes we have been procuring PBR.A and EC and are on the search for other Brazilian value plays that we can access (quite unbelievably our primary broker, IBKR, doesn't support trading on the Brazil B3 exchange). Outside of Brazil we have been increasing our position in ABRA silver, which has a severe warrant overhang due to end in May. They continue to put out impressive results with the drill, and we believe the warrant overhang is causing some overhead pressure on the share price in the short term, which should bounce once we have worked through the warrants.

Finally we have been busy trying to find asymmetric opportunities in the gold mining space after a tough 2022 for the sector. We are still very supportive of a strong gold price in the years ahead and valuations in this sector have come off notably since the summer of 2020 and now offer some compelling entry points. We have been focussed on finding plays that could 5-10x in a relative quick timeframe (1-3 years) with, in our view, rather limited downside. This is not an exact science and each position only represents a small % of our overall portfolio, and we are taking a basket approach to this concept. We have so far initiated positions in ATLY on the TSXV (Altaley Mining) and GPR on the ASX (Geopacific Resources). Both in our view offer tremendous upside, if management can deliver change and bring the respective stories back to some credibility. Both could equally go to 0 if they continue to fail to deliver what they promise. We have several others on our radar and are waiting patiently on the sidelines for the moment to pounce.