Twenties Research 2021 review
Not financial advice. Full disclaimer available here.
Although the Twenties Research website only went live in the later part of the year, I chose the publish date of each newsletter as per the month where I put on a position in my personal account. While it's too early to assess performance, my views have evolved with the market and I do believe some degree of commenting is appropriate.
So here it is, in chronological order:
Up over 50% since January, Uranium is finally starting to get the attention it deserves from the market. The Sprott acquisition this past summer was the catalyst that revived investors' interest and sent the commodity to multi-year highs. Yet, the industry remains in liquidation as Rick Rule likes to say, meaning it costs more to produce a pound of uranium than the miners are currently selling it for.
Although one might argue that the easy money has already been made, I believe the trade still has legs and expect at least a double from here. The price went up because investor demand went up but the utilities have not come back to the market. Once a new contracting cycle begins, we should see an even bigger move.
Up 15% in USD terms since February (excluding dividends), I have been way too shy with this overlooked Russian energy producer. The recent developments in Europe and the ESG mafia have made me much more bullish and I have since added to my position twice. While my entries turned out to be ill-timed, I am not worried because Lukoil is still a very cheap security at current prices.
If we get another pull back, I might sell some gold to increase my allocation to Lukoil or perhaps even buy calls on the underlying commodity. Unlike uranium, oil is now trading above its marginal cost of production, but if we were to revisit $50/bbl, then options on futures will likely offer a better risk/reward than the equities.
Featured as the sample newsletter and down 30% since March (excluding dividends), Ashmore has been a terrible performer in 2021. Great marketing skills! The share price was hit by a strong dollar and bearish news coming out of China, most notably the collapse of Evergrande in which Ashmore was a bondholder.
Contrary to my expectations for the next decade, US markets have continued to outperform. As long as this trend stays in motion, emerging markets are unlikely to do well irrespective of fundamentals. I am still of the belief that Ashmore is a low-risk way to invest in emerging markets and prefer to own the London-based asset manager over ETFs.
Flat since April, gold has been a disappointment for many investors this year, myself included. Inflation is here and the yellow metal is not doing what it's supposed to do, i.e. protect purchasing power. Or is it? Gold may have failed investors this year but it's too early to call it dead money in my view. This is just a cyclical decline in the bull market that started in 2019 until proven otherwise.
The market has a tendency to do whatever hurts the most amount of people. Wouldn't it be ironic if bitcoin and oil, which made gold look like shit in 2021, go nowhere in 2022 while gold takes off? This is only one scenario, not a prediction, but if it does materialise, is your portfolio prepared for that? I own all 3 assets.
I decided not to invest in tobacco in May and I am glad I did not. I just think there are better places to be and it just so happened that cannabis popped up on my radar in November. I am not saying Verano is going to be the next Phillip Morris, only that the cannabis industry has much better prospects than big tobacco.
I got so excited about Nintendo last summer that I bought shares almost immediately after I came across Ryan O'Connor's report on the Japanese household name. I then sized my position upon doing my own due diligence. The stock has gone sideways since August and my initial enthusiasm has come down significantly. Not sure I'll up my allocation to 10% as originally planned.
After talking to a few gamer friends of mine, none seem to be playing Nintendo games. We have also had a couple of bearish data points: 1) the Switch is no longer the best selling console out there, the PS5 is 2) chip shortages are estimated to impact hardware production by 20%. The good news is: there is still a lot of demand.
We can't produce enough to meet the demand we are expecting during the upcoming holiday season.
Nintendo President Shuntaro Furukawa
I sold PLBY group after it hit my price target of $40/share mid November, earning a return of 60% in less than 3 months (excluding premiums). The stock has erased pretty much all of its gains since so I am thinking about selling put options again.
This is the latest addition to the newsletter but I do not personally own it. I don't have anything new to add to the piece published on December 6th. The stock is up 16% since then and 2022 could be a great year for cannabis investors if Biden wants to win over a few votes before the mid-term elections.
I'll post a new idea in the coming days. In the meantime, I want to thank you for reading Twenties Research and wish you all the best for 2022.