Weekly rollup | May 23-29 2022
Stocks Mentioned: BW LPG (BWLPG), Alexco Resource Corp (AXU), EuroDry (EDRY), West Fraser Timber (WFG), Benchmark Metals (BNCH.V), iShares Global Timber & Forestry ETF (WOOD)
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May 23 2022
From BW LPG (BWLPG) Q1 presentation. The company is set to achieve record high profits in 2022, as charter rates are about to move higher due to the long-term trend of rising LNG exports from the US and Middle East. This is not a stock that looks deceptively cheap based on cyclically high earnings - it's cheap based on earnings at the early stages of a cyclical recovery.
This is how I'm currently positioned on my personal portfolio. Gross exposure is as a % of account NAV. I'm net long after adjusting for cash and short positions. I'm looking to add more dry bulk exposure this week and increase my weighting to gold explorers to 20%.
Sell Alexco Resource Corp (AXU)
From the Q1 results press release:
"We have seen improvements and better results recently with our underground activities at Keno Hill," said Clynt Nauman, Chairman and CEO of Alexco, "but with that said, we remain below where we need to be for development rates, equipment availability, and ore extraction rates. In terms of providing a formal outlook for the balance of 2022, the Keno Hill operation needs an additional period of time to confirm improvement in supply chain efficiencies and mechanical availability of underground equipment, which is the primary driver for accelerated ramp up progress. The Company is evaluating a number of production and operating scenarios keying off supply line risk and availability of maintenance technicians as the basis for forecasting underground development rates with the objective of providing further clarity and confidence on reaching our targeted 400 tonnes per day mill throughput. Therefore, while the Company had previously anticipated providing formal guidance for the balance of 2022, we are deferring such guidance until such time when we can confidently guide the market. I am hopeful that with another several weeks of performance under our belts, we will be in a much better position to update the market."
From being confident about achieving commercial production in Q3, the company walked back to deferring providing even production guidance for the remainder of this year. This was on May 13. Shares closed at 84.4 cents that day. I kept thinking I should wait for a rebound to lower my loss on this position, but with the main reason for putting on this trade (AXU actually achieving commercial production) having failed, it's time to pull the plug. Hope is not a trading strategy. Maybe the stock rebounds next week or next month, but I'm not going to hold on just to recoup some of my losses, not when there are better trades that can actually make money.
Sell Alexco at 74 cents, for a loss of 57.5%.
Buy EuroDry (EDRY)
I've been looking to add dry bulk shipping exposure and today's sell-off in EDRY presents a great opportunity to get started. This is a simple value play - profitable, cheap, with earnings expected to grow. I'm attaching the latest company presentation below, but the key is this part. The NAV/share was $45.3 at the end of Q4 2021.
May 24 2022
Today is a good day to pick up some West Fraser Timber (WFG). Pristine balance sheet, with no net debt, trading at 1x book value and a fat 35% net profit margin. Market seems to believe WFG deserves to go down with the homebuilders, even though the company announced a tender offer and 2022 earnings should cover at least 40% of its current market cap.
Initiated a trading position on WY today. I don't expect to hold it for too long (days to weeks).
May 25 2022
Buy Benchmark Metals (BNCH.V)
This is a gold explorer in British Columbia, cheap based on ounces in the ground and with promising expansion potential. Details here
Actual used vehicle sales are dropping. Used vehicle prices, while off the high, are holding most of their gains. Dealers have plenty of inventory but seem reluctant to cut prices to a level that would clear it.
Energy is the only sub-sector to post a gain in market cap since the index peaked early this year. Details here
May 26 2022
Construction activity is still strong, net home sale prices are still rising. WOOD has been consolidating for well over a year. I think we break higher, not lower.
May 28 2022
Positioning as of this week's close. Gross exposure as % of equity is 141% and I'm net long 125%. I need to find more worthy gold explorers and producers in order to increase weighting there. Timber and dry bulk have my attention right now. The short trades aren't working out, but I'm not going to pivot just based on a week's worth of bear market rally lifting everything up. I'm still massively net long after all.
May 29 2022
How is this relevant to trading? Look at the date on the article about Bill Gates. Like Covid-19, they prepared the next pandemic well in advance.
Next comes the fear porn.
250 million will die unless we get jabbed again with a vaccine that's oh so conveniently already available and in government hands, ready to be deployed.
You can't make this stuff up.
If you have travel plans, better hurry and pay the high airfares and hotel costs, before borders are closed and the Davos elite make us lab monkeys yet again. One way to reduce record gasoline demand ahead of the summer driving season is by putting in place another lockdown. Just saying.
If the markets have bottomed, it is likely in response to the Fed getting ready to inflate yet again using the monkeypox outbreak as an excuse. Just like Covid was an excuse to end the previous rate hike campaign.
We are in for an interesting next few weeks as the propaganda machine warms up.
Source: Capitalist Exploits Insider newsletter, which I highly recommend.