Bi-Weekly rollup | July 18-31 2022
Stocks Mentioned: Discovery Silver (DSV.V), Benchmark Metals (BNCH.V), Valero (VLO), Textainer Group Holding (TGH) and Triton International (TRTN), Uranium ETF (URNM), Cameco (CCJ), Paladin Energy (PDN.AX), Yellowcake (YCA.LN), Ur-Energy (URG), iShares Global Timber & Forestry (WOOD), West Fraser Timber (WFG), Matson (MATX), Netflix (NFLX)
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July 18 2022
From Lynas Rare Earths Quarterly Activities Report:
"During the quarter, Lynas continued to use both commercial shipping and charter shipping to transport concentrate from Fremantle to Lynas Malaysia, mitigating the risk of unforeseen delays in commercial shipping schedules.
As has been reported across industry, various cost categories have seen significant increases over the past 12 months. Royalty cost increases follow price increases in the market, freight costs were approximately double due to global shipping cost increases and the addition of charter ships to mitigate the impact of port and shipment delays. Chemical input costs have increased by approximately 20% with some specific chemicals seeing changes of up to 70%.
More recent shipping and chemical cost developments indicate a moderation of the price pressures and in some instances even show prices retreating from their most recent highs. Notwithstanding these recent trends, we have redoubled our focus on opportunities to improve efficiency recognising the continued uncertain external conditions."
Freight costs were approx double in Q2 2022 vs Q2 2021! What does this say about ZIM earnings and the containership trade? This is why I've stuck it out through the correction and continue to pound the table on the ZIM trade.
Another data point on why shorting CACC is well timed.
Sell Discovery Silver (DSV.V)
I recommended Discovery Silver for Against All Odds in the October 1, 2021 issue, at C$1.26, two days after the stock bottomed. The stock went on to hit a high of C$2.28 the next month, but has since given back all its gains and sits at C$1.04. Silver isn't looking bullish right now, so it makes no sense to hold on to a stock that has done a round trip and doesn't have any compelling fundamental reason for owning it. This was a poorly managed trade, going from an unrealized gain of 81% to a loss of 17%. I'm exiting so I can put this behind me and focus on finding the next trade.
I don't want to spend time trying to convince myself (or you) that this trade actually has so much going for it, that by just holding on to it I'll be able to sell at the highs a second time around. Better to just walk away and put the loss behind me. I'm taking a critical look at the gold explorers I recommended to see if I should let those go as well.
Sell Benchmark Metals (BNCH.V)
In retrospect, I should have just gone through with it on 6/13 and exited when the fundamentals soured. The low on that day was 76 cents, which is far better than the bid at 56 cents today. Lesson learnt. At least I'm cleaning up poor trades now, freeing up capital for what appears to be the beginning of a new regime.
Based on entry at 78 cents on 5/25 and exit at 56 cents today, this trade lost 28.2%.
Possible rejection candle forming on the VLO daily chart, right at the 100 DMA and 20 EMA crossover point. This has been a frustrating trade. Stop loss moved from $130 to $119.2. I'd like to add to my short but don't want the added risk ahead of earnings.
Container lessors TGH and TRTN looking particularly bullish here. If we don't go into a long lasting recession, this trade should have legs.
Exactly a month later, bitcoin hasn't gone below the liquidation low on 6/18. Chances are that low is going to hold and the primary trend is going to flip bullish. We are probably not going to get another bubble like early 2021 but the trend is indicating higher highs and higher lows. Note that the Celsius and Voyager Digital bankruptcy news failed to send the price lower.
July 19 2022
The uranium ETF (URNM) just broke out of its falling wedge pattern on the daily chart. However, uranium equities in general aren't confirming the move. Major miner Cameco (CCJ) is still consolidating. Paladin Energy (PDN.AX) announced plans to restart its shuttered Langer Heinrich mine in Namibia and the stock is flat on the news. URNM still looks sick on the weekly chart. Yellowcake (YCA.LN) appears to be moving higher following its month long consolidation between 320-350 pence. The company last reported NAV/share of 433 pence on June 30, assuming $50.5/lb spot uranium. Spot uranium is now at $46/lb. I expect uranium to head higher so the discount to NAV is just icing on the cake and not the major reason for holding on to this trade. The Ur-Energy (URG) holding is for the added alpha once liquidity comes back to this space.
I quit The Dollar Vigilante in May 2021. Since then, I've been putting out my own content. Everything I've written in this page and the Against All Odds Live page earlier can be found on my website: https://www.kashyapsriram.com/articles
The weekly rollups go back to June 2021 and is a timeline of the content I've put out. Some articles are standalone and can be found in the tabs titled "general", "stocks" and "gold".
In compiling my track record, I've considered the first mention of whatever can be construed as an explicit buy recommendation. Exits have always been clear, except on a few technical trade ideas I put out. For those, I've just presented them in a separate section titled "Technical Trade Ideas". I've excluded my futures trades since that was more of a narrative than a recommendation. You can find my track record here.
I'm not including metrics like average gain or win/loss ratio since I consider them meaningless. Why? Because maximizing for average gains or seeking a higher win rate implies being more selective. I believe the real returns are made by pressing winning trades, adding and reducing to positions depending on their performance. My commentary on markets and specific trades, plus my weekly updates sharing my personal portfolio allocation is meant to help with that.
Questions/comments by DM always welcome.
Buy alter triggered on WY. Not taking it yet, since this is just noise from the algos chasing the timber trade. However, WOOD has gapped up right over the 20-day EMA so things may start moving soon. Patience.
WFG shares halted, news pending.
West Fraser Issues Statement:
"The Company is aware of recent market and media speculation. Although the Company has previously met with Kronospan, an existing shareholder, and CVC Capital Partners, the Company has not received a proposal and there are no ongoing discussions regarding the terms of any transaction. The Company is focused on executing on its business strategy to create shareholder value."
This means a deal hasn't been ironed out yet, although one may be in the works. Where there's smoke...
July 20 2022
Matson (MATX) Q2 guidance:
Expects 2Q22 net income and diluted EPS to be $373.3 to $377.9 million and $9.31 to $9.42, respectively
Year-over-year increase in consolidated operating income driven by China service strength
Repurchased approximately 1.6 million shares in 2Q22 for a total cost of $138.1 million ($86.31/share average)
NFLX is downsizing its workforce. From Q2 shareholder letter: "We’ve adjusted our cost structure for our current rate of revenue growth. This resulted in approximately $70 million of severance costs and an $80m non-cash impairment of certain real estate leases primarily related to rightsizing our office footprint."
July 21 2022
July 27 2022
It's earnings week. Rather than agonize over how the algos will react, I'm off the clock.