Category Archives: Uncategorized

The oil of the 21st century

What do these cars have in common?

McLaren 720s, Fiat 500, Mini Cooper

Probably more than you think.

For one, they were all designed by the renowned designer Frank Stephenson, who has also worked for the likes of Ferrari, Ford, BMW, and Maserati.

But maybe more surprisingly, they share quite a bit under the hood too. That’s because, despite belonging to different brands and market segments, all three of these cars are likely facing production delays due to a global shortage semiconductor chips.

Semiconductors are present in almost all electronics and have been used in cars’ internal computers for decades. What is different today is that the chips going into cars are crucial components for advanced features like touch screens, navigation systems, driver-assist features and more. Concurrently, the adoption of electric vehicles is starting to accelerate meaningfully, driving further chip demand in the sector.

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OUR 2020 RESULTS

Our net weighted average return in 2020 was +18.23%. Since 2015, we have generated a net weighted average return of +54.39%.

2020 was a challenging year. We were forced to navigate an all-out panic in financial markets while weighing the staggering human costs of the Covid-19 pandemic. Shortly after what turned out to be the market lows of the year in March we wrote the following:

“The most significant reasons as to why markets have rebounded are 1) the massive rescue package passed by the US Congress, and 2) the massive balance sheet expansion by the Federal Reserve. The amount of money with which the richest country in the world is ready to attack this crisis is without comparison in the history of the world. And what you learn in capital markets is that you don’t fight against the guys that make the bullets.”

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Tesla at the Turn

2020 has been quite the ride, and it’s not over yet.

One of the craziest rides of the year has been the phenomenal growth of Tesla’s share price, and at the close of trading this Friday it will officially join the S&P500 index as the 7th largest holding.

Since the start of 2020, Tesla’s share price has grown by an astounding 657%, compared to a 16.39% total return for the S&P500 index:

The stars have aligned for Tesla bulls, but it is important to consider that its addition to the S&P500 is a zero sum game. It is forecast, that Tesla will be added as a 1.5% weighting. This implies that approximately 1.5% of all S&P500 holdings will be put up for sale to make room for Tesla’s inclusion, meaning that there will be a record amount of stock for sale.

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What the past can tell us about the green energy future

The Latvian version of this article is available in print in the December 2020 issue of Forbes Latvia.

The story of capitalism is the story of creative destruction.

A concept often presented as a critique of the system, especially in the context of today’s push for sustainability, creative destruction is the process of industrial transformationthat continuously revolutionizes the economic structure from within, dismantling long-standing practices in order to make way for new methods and technologies. In essence that constant innovation leads to obsolescence.

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Strategy 2025

The best way to predict your future is to create it.

  • Abraham Lincoln

Our mission is to safeguard the future financial prosperity of our clients. While many find comfort in what may have worked in the past, we know that our goals can only be achieved by boldly looking into the future. As such, we are completely focused on finding investment opportunities that offer compelling upside convexity, while managing downside risk. Our purpose is not to time markets, but to identify ascendant industries and best-of-class companies and have the patience to reap substantial rewards.   

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Vaccines are coming, what’s next?

Pfizer, Moderna, AstraZeneca.

Three weeks and three potential vaccines with extremely promising Phase III trial results that likely mean the first vaccinations will start within a few weeks.

These are remarkable scientific achievements well worth reading more about, but I want to focus on what this means for financial markets.

After stumbling through the darkness of much of this year, market participants finally see the light at the end of the Covid-19 tunnel. With a vaccine almost certainly coming within the next six months, and even sooner for targeted at-risk groups like doctors, nurses and other frontline workers, as well as the elderly, we can now plan ahead for a return to normalcy by next summer.

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On The Limits of Perception, The Power of Math, and Human Behavior

Here is the English version of my most recent article in Forbes Latvia. If you are heavily invested in technology stocks, you might want to pay particular attention…

I am going to tell you a story whose provenance I cannot ascertain, but that speaks to the limits of perception, the power of math, and human behavior.  

The one constant of this story is that there is a chessboard. Other key components are 1) a king or emperor, (2) a man, and (3) grains.  

Now at this point you might have guessed the story, but you will remember it the way you first heard it, and will most likely not know the alternative endings. For those of you who have no idea what I am talking about, here we go…  

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Post US Election Update

Last month, we wrote an article for Forbes magazine about how this year’s US presidential elections could impact the stock market.

https://www.axios.com/election-results-2020-trump-biden-3a07f4c7-fb4d-4d62-b18b-392ff6f1eeb5.html

Here is how our prognosis stacked up to what has come to pass over past couple of days:

The impact of mail-in votes

“The first major issue is that Covid-19 restrictions will create a very different in-person voting environment than in previous elections. It is also anticipated that there will be a record number of mail-in votes, which take considerably longer to tabulate. This means that there could still be many votes to count in the days following November 3rd.  

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Actually Investing in a Green Hydrogen Future

In my last blog post, Thinking About a Green Hydrogen Future, I laid out the increasing role for hydrogen as Europe transitions to a net-zero carbon economy over the coming decades.

Such a transition will require significant changes across the entire spectrum of the continent’s energy, industrial and transportation infrastructure, and there are already many companies working to address these needs. Whether it is large chemical suppliers investing to secure access to green hydrogen as a feedstock, automotive players partnering to develop fuel cell technology for commercial vehicles, or legacy businesses in the energy sector searching for new sustainable growth opportunities, all the major players are exploring their options. The realization that hydrogen investment is necessary provides a strong tailwind for the industry, especially for a number of smaller players that have spent years developing the technology that is about to be at the forefront of this transition.

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What’s Better Than Bitcoin? Companies That Dig Rocks (Seriously!)

We get a lot of questions about cryptocurrencies. Especially when there is upwards price movement. No one ever seems to ask about them when they are not performing so well… I always answer, that I cannot buy cryptocurrencies for clients, and that we are fully committed to finding profitable opportunities elsewhere.

One example is our investment in copper miners. Copper miners?!? Yes, copper miners.

Since the lows of March 16th, copper miners Freeport McMoRan and HudBay Minerals have actually outperformed Bitcoin:

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