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Monthly rollup | January 2022

Stocks Mentioned: Newcrest Mining Ltd, Danaos Corp (DAC), ZIM Integrated Shipping (ZIM), Global Ship Lease (GSL), Credit Acceptance Cop (CACC), Grindrod Shipping (GRIN), Champion Iron (CIA.TO), Bitfarms (BITF)


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January 05 2022



January 08 2022


The following excerpt from a paid newsletter I subscribe to explains the situation in Kazakhstan from an investor's perspective. I got back into uranium taking advantage of the tax loss season bargains, and it appears that fundamentally speaking, the bull market is well on its way again. Note that the author talks about how Chevron had to suspend operations due to protests. True, Kazatomprom says operations are unaffected so far, but this is the kind of situation that can escalate quickly. There's limited downside if things go back to business as usual, and massive upside if things take a turn for the worse. I wouldn't buy CCJ due to its Kaz exposure, I find UUUU way overvalued, UEC is sub-par and run by a promotional CEO I'm not a fan of, so I'm sticking to URG. If I wanted to take up my exposure, I'd go for URNM or Yellowcake plc (LON:YCA). Another idea is to buy URNM and short CCJ/Kazatomprom to smooth out the volatility of this trade.


"In the aftermath of the holiday season, it’s the former Soviet Union in the spotlight, with verbal tensions rising–at least on this side of the Atlantic–over Ukraine’s border and Kazakhstan imploding with gas price hikes managing to take down an entire government, putting the world’s largest uranium supply in a state of dangerous uncertainty.


While the fuss over Ukraine is only partially contributing to Europe’s record-high gas prices (there are many other factors contributing), the violent unrest in Kazakhstan, which has now seen Russian military intervention, is having an immediate impact on uranium prices. Until now, and for the 29 years that Nazarbayev ruled Kazakhstan in an authoritarian style, Western investors have of course viewed the largest uranium producer (and major oil producer) as a very stable place to park their money. Protests, the security force’s response, the government’s resignation, and now Russian military intervention destroys that stability overnight.


The week started out with mass protests (almost unheard of in this country) over a 100% hike in gas prices that prompted security forces to use stun guns and tear gas, which only served to exacerbate tensions. By Wednesday, protesters had stormed the presidential residence, setting fire to it, and the government was forced to resign. By Friday morning, the president had ordered security forces to “shoot to kill” protesters, branding them “criminals and murderers” with whom there would be no negotiation. This has empowered the opposition in Kazakhstan, which is now calling on countrymen to resist the Russians, who will be seen as attempting to recreate a Soviet Union-style structure.


Protests rarely happen in countries where a president manages to stay in dictatorial power for 29 years. Until 2019, that was Nursultan Nazarbayev, who finally stepped down and was succeeded by Kassym-Jomart Tokayev. Tokayev is not Nazarbayev, and the fact that on Tuesday he felt it necessary to say the government would not fall as a result of the protests was indicative of what was to come.


On Thursday, boots started landing on the ground from the Russian-led Collective Security Treaty Organization (CSTO), a situation that opens up more avenues for Russia to subtly challenge Kazakhstan’s sovereignty. Realistically, Kazakhstan under Tokayev has been a powder keg just waiting for something like this to happen. It would have happened sooner had the pandemic not distracted protesters from key issues.


On the uranium scene, Kazakhstan’s Kazatomprom (KZAP.KZ), the world's biggest producer, says operations have not been affected, including exports; however, there is concern that operations will be impacted ultimately, driving spot prices up to $46 per pound Thursday, from the $42 mark where it was trading at the first of the New Year. While Kazatomprom claims no impact as of yet, we expect there to be disruptions in uranium operations, with initial disruptions already priced in.


On the oil scene, Kazakhstan produces about 1.6 billion bpd. As of Thursday, Chevron, a 50% JV owner in the Tengiz oilfield, said it had cut production due to protests at the facility. By Thursday, the unrest in Kazakhstan had helped lift crude oil prices somewhat (in proportion with Kazakhstan’s approximately 2% contribution to global oil supply). All of this, of course, diverts some of Russia’s (and the world’s) attention from the troop buildup on Russia’s western border with Ukraine. This is a cat-and-mouse game that is less about Ukraine and more about NATO’s eastward expansion as the frozen conflict takes on a Cold War-style deterrent element.


This time, Ukrainians aren’t protesting their government, and Kyiv isn’t imploding, leaving a vacuum for Russia to step in and occupy at will. The panic is largely confined to the US media, while Kyiv is far more relaxed, it is business as usual (occasional skirmishes) on the front lines in Ukraine’s eastern Donbas region.


Next week will see a meeting between NATO officials and Russia, and we do not expect any major developments prior to that. Red lines in this situation could be Ukrainian preemptive attacks on the Donbas region to challenge Russian and pro-Russian separatist positions (beyond what is already a bit of a back-and-forth at the front line); and a clear signal from NATO that not only will it not back down in the east, but it will strengthen its position in Europe and continue to fund the Ukrainian military, even if it will not allow Ukraine to become a member."


January 11 2022


PVG Update: I'm tendering my shares for cash. If I receive Newcrest shares, I'm planning to sell and deploy the proceeds in the other gold producers I like.



The fund struggled in the final two months, dropping 8% and 10.7% in November and December, respectively, the people said. That erased a 13% gain that it had built through the first 10 months of the year.


The ARK funds and Tiger have several holdings in common, chiefly the tech/momentum names that are tanking hard now. Here's where it gets interesting - as Tiger, Ark, and the copycat fund managers all dump these stocks, nobody will take the other side of the trade.


You can bet there are hedgies amassing short positions on these stocks as they smell the blood in the water.


There's no trade here for me, but if I'm forced to make one, I'd go short the MTUM ETF (0.42% fees vs 3.35% for ARKK).




January 12 2022


My views have changed tremendously on ZIM and DAC since October 05 2021.


I've covered ZIM here earlier, but here's a quick brief on DAC.


DAC is a containership lessor, in the same line of business as GSL, which I've also mentioned earlier. It’s a cash flow story with undervalued assets to boot.


My main thesis is that higher shipping costs are here to stay – this decade is a structural bull market just as the last decade was a structural bear market plagued with overcapacity and unserviceable debt. Easy money has inflated asset values and made debt more serviceable, just as global trade is picking up and delays/port congestion is further contracting supply. The current DAC market cap of $1.5B is less than the Q3 book value of $1.9B, and the book value understates the market value of vessels. The company had an operating income of $112.2M for Q3 and $242.6M for the first nine months of 2021. The stock trades at a forecast price-to-operating earnings multiple of between 4.2-4.7x. Now here’s where it gets even more interesting. After selling 3 million ZIM shares through October 2021, the company owns 7,186,950 ZIM shares. Assuming the company stops deliberately tanking the ZIM price with their clumsily planned sales, ZIM is easily going to reach $90/share soon, conservatively speaking. If you back out that $648M valuation of ZIM from DAC’s $1.5B market cap, the stock is trading at a Price-to-Operating Earnings multiple of 2.4-2.7x.


Even using ZIM’s current market price instead of my $90 forecast, the operating earnings multiple only rises to 3-3.3x. Debt? Very manageable at $1.6B, backed by $2.8B in vessels as per the balance sheet. Given the surging steel prices and backed up shipyards, those vessel values are nowhere close to current market prices. Management hinted as much in their Q2 2021 presentation, pegging their NAV/share at $144.


The stock has been in a sideways consolidation for months. I’m a buyer now, but if I wanted to use a technical entry point, I’d wait for it to cross the 100 day MA ($75) before entering.


GSL is another cash flow story with great assets, operating in the mid-tier containership lessor segment.


GSL Q3 2021 Form 10-Q: "Adjusted to include all charters agreed, and ships contracted to be purchased, up to November 9, 2021, the average remaining term of the Company’s charters as at September 30, 2021, to the mid-point of redelivery, including options under the Company’s control and other than if a redelivery notice has been received, was 2.5 years on a TEU-weighted basis. Contracted revenue on the same basis was $1.60 billion. Contracted revenue was $1.85 billion, including options under charterers’ control and with latest redelivery date, representing a weighted average remaining term of 3.2 years."


Using the latter guidance, $1.85 billion over 3.2 years works out to $578 million a year. With YTD revenue of $267.3 million, annualized to $356.4 million, the jump in revenue from contracted charter agreements works out to 62%! Now let’s assume the company only maintains its current margin of 58% in OI and 38.6% in NI even at higher revenue levels.

That’s $335 million in OI and $223 million in NI. Market cap: $860 million.


The company will be able to double or triple the charter rate for vessels rolling off charter due to surging demand. Residual values should rise as steel prices rise, which will also induce scrapping among the lower TEU (1k-2k range) and cascading from the lower TEU segment will benefit GSL, which owns the mid-range TEU vessels.


[Note: This analysis assumes unchartered vessels earn zero and carry no opex, while in reality unchartered vessels are going to trade at a huge margin and earn multiples of opex].


*Cascading is shipping lingo for loading more containers on bigger ships to reduce cost per TEU, which benefits bigger vessels at the expense of smaller vessels. The sweet spot is the mid-tier segment, which takes business from the smaller fleet but doesn't suffer the same fate at the hands of the larger vessels, since the 10k+ TEU range vessels are constrained in the trade lanes they can operate. GSL is targeting that sweet spot, which makes it different from DAC which targets the higher range.


GSL is a straight up buy, TA or otherwise. ZIM, DAC and GSL make up 14% of my personal portfolio.


Uranium is going to be whipsawed by news from Kazakhstan. Oil production seems to have stabilized (for now), which implies the geopolitical risk premium that sent uranium prices higher last week may abate. For daily uranium spot prices, follow @numerco on Twitter. I think the dips will be buyable since this could just be the last push needed to get utilities contracting again. If not, there's very limited downside since the froth is already off the SPUT induced bubble from September 2021.


The short CACC trade looks good again. Rising rates is great for banks, not so much for sub-prime auto lending companies. Pair trade idea: Short CACC/long KRE.


BDRY has had a horrible start to the year (down 16%) while the dry bulk shippers (EGLE, GOGL and SBLK) have been flat or up. BDRY tracks the near-dated dry bulk freight futures. Rains in Brazil curtailing iron ore production and the ban on Indonesian coal exports could explain why. The market expects lower rates for now, but the fundamental uptrend in dry bulk rates still remains.


Scalp trade: Short Teck Resources (TECK). Workers at its Highland Valley copper mine in BC have gone on strike. And both met and thermal coal prices should stabilize now that Indonesia has lifted the export ban. I suspect Teck ran higher recently on rising coal prices, so the move has run its course.


January 15 2022


Harpex container charter rate index is at 3817, 4x last year's levels.


January 19 2022


Good intro to NFTs for the newbie investor - The Booming Business of NFTs


January 20 2022


Growing number of employees turning to contractors? Or perhaps new business creation is rising.



CORZ - New bitcoin miner debuting on the Nasdaq today via the SPAC route. As of year-end 2021, Core Scientific operated a self-mining fleet of approximately 67,000 state-of-the-art ASICs (6.6 EH/s) and over 80,000 ASICs (6.9 EH/s) for third-party hosting clients. Core Scientific mined for its own account 1,044 bitcoins in December and 2,498 bitcoins in the fourth quarter of 2021. At the end of 2021, Core Scientific held nearly 5,300 bitcoins on its balance sheet.


For comparison, the largest miner MARA has a hashrate of 3.5 EH/s (2.2 EH/s for my favorite crypto miner BITF).


Scorpio Tankers selling LR1s to Hafnia. Bullish Hafnia, not so much STNG given the history of that management group.


The very same management group decided to sell dry bulk vessels in order to become woke. STNG may pop, but I'd steer clear of that stock.


January 21 2022



The Kazakh situation is unresolved but U.UN (SPUT) is trading at an implied uranium price of US$40.4/lb. It's time to buy U.UN/SRUUF, even though I don't like the fund structure. If you have access to the LSE, you could buy YCA, but the volumes (and Twitter marketing) are going to be higher for the Sprott trust, so I'm going with that.


Buyable dip in Champion Iron (CIA.TO) today. I'm not too worried about any temporary reduction in steel production in China, or drop in iron ore imports. Bloom Lake Phase 2, expected mid-2022, should double capacity and is clearly not being priced in.


January 24 2022


Grindrod Shipping (GRIN) is my second favourite in the dry bulk space, after Golden Ocean. The float is only 37%, and there was an overhang from a legacy shareholder exiting, but the company is gushing cash and trades at a ridiculous PE of under 3. No debt problems or other balance sheet issues. Q1 is seasonally weak for dry bulk, which makes it the perfect time to pick up shares and wait for Chinese demand to return.


Putting this out here because it'll be interesting to see what remains strong in the coming weeks and months.


January 25 2022


Possible 2B reversal pattern emerging on SWBI. Stock trades at a ridiculous trailing PE of 3 and 0.8x sales. This in the backdrop of covid and civil unrest creating 12 million new gun owners and demand remaining strong. NICS background checks went up from 28.37 million in 2019 to 39.7 million in 2020. 2021 is only marginally lower at 38.8 million. According to the National Shooting Sports Foundation, 22.1% of first time gunowners purchased a second firearm within 18 months of their first purchase, and the gun ownership base is expanding to encompass more women and minorities. Even if demand tapers off slightly, valuation wise the stock is super cheap. Company has a buyback program in place, and has already purchased 26.2 million shares at an average price of $14.2/share. $334 million in current assets, $157 million in total liabilities. Balance sheet is in ship shape. There might be some bad PR about a Mexican govt lawsuit, but the lawsuit itself should have no material impact since it's highly unlikely to lead to any settlement.


Citron Research is bullish on Blue Apron. Not a trade I'm looking to do but something interesting for the value crowd. Blue Apron - The Answer to Food Inflation.


Bitfarms (BITF) and crypto miners in general looking extremely interesting here. If this is the beginning of a new move up in bitcoin, there's plenty of time to get positioned to ride the uptrend. CORZ, SDIG, IREN and ARBK are also worth looking at.


January 26 2022


Container freight rates started to move up again despite the upcoming Lunar New Year holidays in China usually providing some respite in trading, expectations of rising COVID cases and subsequent delays pushed the FBX global index to a 2-month high, flirting with the $10,000/FEU mark.


GSL managed to lease a 20-year old 2200 TEU containership at $38k/day ($13.87 million per year) for 3 years, That's a 20% higher rate than GSL negotiated for another vessel last quarter, and 300% above the prior charter rate on the same vessel. Business is booming. Containership lessors DAC and GSL both have amazing upside as both earnings and vessel values continue to rise.


This content was originally published as part of Against All Odds Research.

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