Monthly rollup | July 2021

Stocks Mentioned: Euronav (EURN), Korvus Gold (KOR), DHT Holdings (DHT), Nordic American Tankers (NAT), Matson Inc (MATX), Cameco (CCJ), Uranium Miners (URNM)

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July 03 2022

July 07 2021

July 10 2021

Revisiting the oil tanker trade

Short Cameco (CCJ)/ North Shore Global Uranium Mining ETF (URNM)

The uranium spot price is on an uptrend but hasn't yet breached $35/lb. While the long term bull thesis is still intact, the stocks have gotten way ahead of themselves. Assuming Cameco produces full bore from all its operations at an operating cost of $32/lb, my valuation model shows that the stock is currently being priced for $69/lb uranium. For comparison, under similar assumptions, Ur-Energy (URG) is priced at $54/lb uranium. Note that these are best case wildly optimistic scenarios. My valuation models show that the entire uranium space is overvalued given that spot uranium prices haven't moved much even as uranium stocks have really taken off.

Price action wise, the URNM ETF and Cameco appear to have topped last month, making this a good entry point for a short trade.

Buy Korvus Gold (KOR, KOR.TO) as takeover speculation.

As I mentioned in the last newsletter, the clock is ticking for Anglogold Ashanti (AU) to make an offer. On May 6, Anglo advanced Corvus $20 million as a loan, and in return was granted an exclusivity period of 90 days in which Corvus would not engage in any other M&A or asset sale discussions. The deadline is August 4, which is fast approaching. I do see a high probability of an offer coming through.

KOR has fallen along with the rest of the gold stocks and remains a compelling value on a standalone basis, even without the added kicker from the potential takeover. If the offer materializes, buying here would mean a 30%+ return within a month.

July 23 2021

From the NY Times: The Federal Reserve entered the 1960s with the same two-part job that it has now: fostering stable inflation and maximum employment by keeping the economy growing at an even keel using its monetary policies, which influence how expensive it is to borrow money. Back then, the Fed was very focused on the employment part of its goal. The Employment Act of 1946 had instructed the government to dedicate itself to creating a strong job market. Years of weak price gains made runaway inflation seem like a distant risk, and a growing number of economists had come to believe that higher employment levels could be “bought” with slightly more inflation. Even when the then-Fed chair, William McChesney Martin, grew worried about price pressures in the mid-1960s, the institution was slow to move, because some of his colleagues hoped to drive unemployment down to 4 percent. When it did raise rates, it did so slowly — a situation that was exacerbated in the 1970s, when Mr. Martin’s successor, Arthur Burns, came under intense political pressure from the Nixon White House to keep easy-money policies in place. By the time the Fed began to fight inflation in earnest, it was too late.

July 24 2021

Bit dated but still relevant: Brazil’s Worst Drought In 91 Years Is Good News For LNG | OilPrice.com

July 29 2021

MATX reports earnings today after the close. Last quarter earnings came in above guidance but shares didn't respond to the earnings surprise (see April 27-28 chart). This quarter should see about 85-100% sequential growth in earnings. The company's preliminary expectations of $3.58-$3.73 EPS is way above analyst consensus of $2.96 ($2.25 and $3.67 are the only 2 analyst forecasts available). Watch for an opportunity to go long today. Idea is to sell the expected pop in share price tomorrow. I also have a long-term holding in MATX, my only exposure to container shipping.

July 30 2021

In case anyone followed me on the above [MATX trade], I closed this trade for a miniscule gain today. I expected the EPS to be higher than guided but it came in at $3.71, within guidance range. I still like the stock as a long term hold.

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