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Msg  334349 of 342652  at  6/18/2021 4:00:33 PM  by

Under the Radar

Portfolio Update - Energy and General Strategy

I wanted to provide a comprehensive update as to what I was doing with my own portfolio, in both the energy and more general sectors.

First, an overview of my strategy right now. I feel like the Fed talk about inflation and higher rates is just that: ALL TALK. I agree with several member son this board (incl. Doom) theres just no chance the Fed can aggressively hike rates without imploding the entire economy. I think the model for us going forward is basically Japan post 1989. We can perpetual quantitative easing (QE) aggressively pushing down the front end fo the yield curve while also simultaneously sopping up the back end. I see a relatively flattish shape to the yield curve and this aligns with what people call Modern Monetary Theory (MMT). This means real interest rates will be negative, possibly even strongly negative for sovereign bonds. Heck, the PIGS (Portugal, Italy, Greece, Spain, etc) have negative real yields on their ten year bonds right now. Yup. Thats reality.

What does this mean for my portfolio? Basically, I am going to use a barbell approach, taking large positions in both commodities (energy, basic metals, precious metals, forestry, etc) as well as loading up on interest rate sensitive names (utilities, pipelines, REITs, telecoms, health care, consumer staples.)

Energy. I have decided to use three names here: Whitecap (WCP) for oil, Topaz (TPZ) for nat gas royalty, and Freehold (FRU) as a 50/50 mixed (liquids and gas). These names have solid balance sheets, low multiples, decent growth potential, but most importantly, with WTI above $70 and nat gas above $3 they are free cash flow machines generating above +15% free cash flow in excess of CAPEX needs.

WCP is a 2.75% p.w. Position with ACB of $5.75
FRU is a 2.5% p.w. Position with ACB of $9.40
TPZ is a 2.5% p.w. Position with ACB of $14.60

In the pipeline space I also own TRP at $55.50 and ENB at $44.25, each around 2% p.w.

As far as general commodities goes, China might be able to tamp down these prices somewhat for a short while, but, the market will ultimately push the commodities group substantially higher. I own positions in a basket of names as follows:

A. Forestry. One name only, West Fraser Group (WFG) at $87 for 2% p.w. The balance sheet is rock solid and they have an aggressive share buyback underway. I am a seller above $125 for 1/2 my shares then wait and see.

B. Copper. I own a large basket of names, weighted highest to lowest as follows: IVN, FM, TECK.b, SLS (exploration play in Ecuador), and CS. Total portfolio weight is right around 10%

C. Precious Metals.

Gold stocks (25%) from highest weight to lowest as follows: ABX, KL, EDV, AEM, KGC-N, AGI-N, EQX-N, SSRM-N, PVG, NFG-v (exploration play in Newfoundland), and LUG.

Silver stocks (10%) from highest to lowest weight as follows: WPM, FR, PAAS, EDR, FVI, SIL, MAG, and GATO.

D. Iron Ore. I have BHP-N at US$72.80 for a 2% p.w.

E. Platinum and Palladium group. My play here is Sibanye-Stillwater (SBSW-N) at US$19.00 for 2% p.w.

Under the Radar

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Msg # Subject Author Recs Date Posted
334406 Re: Portfolio Update - Energy and General Strategy - CS jwing 4 6/19/2021 12:12:55 AM

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