The energy play hiding in plain sight

🎙️ NEW PODCAST WITH CHRIS MACINTOSH

Chris recently joined Tom Bodrovics on his Competent Investor podcast. With the world coming apart at the seams, there was no shortage of things to discuss.

Here’s a few of the topics they covered:

Why all wars are bankers’ wars. Wars are never spontaneous, never organic, and never without a financial architecture quietly humming in the background. Who benefits when the drones start flying and the bombs start dropping… and how do you position for it?
Yes, we’re going through an extreme turning point: politically, economically, and geopolitically. But historically, extreme disruption and extreme opportunity have always been two sides of the same coin.
It pays to be boring: tobacco distributors, window cleaning companies, plain-vanilla manufacturers. Unsexy businesses that won’t win you any friends at dinner parties, but they just quietly pay you. As Chris puts it: most investing should be boring.
How the education system is designed to create bad investors. That’s not a bug, but a feature.
On risk: you cannot eliminate it. You can only manage it. Most investors spend their careers trying to do the former while neglecting the latter entirely. Chris pulls back the curtain on how risk is actually being handled across our hedge fund and Insider portfolios (and why the distinction matters more today than it has in years).
Fridges as currency (don’t laugh, it actually happened in Zimbabwe). This wasn’t some quirk of a failed state. It was a completely rational response to a collapsing monetary system. What this tells us about where we are today.
Where are the most mispriced opportunities hiding in today’s market… and why the crowd is looking in exactly the wrong places.
The patience collapse: the average stock holding period has shrunk from 14 years in the 1960s to just 3 months today. That’s emotionally-driven noise (you can’t expect a company’s fortunes to meaningfully change in a quarter), not investing. Chris explains how to take advantage of this collective impatience by simply being willing to wait.
And much more.

You can listen to the entire conversation on Youtube here.

💸 TO BUY… OR TO SELL?

There’s a pattern we’ve noticed over the years. And it tends to repeat itself with almost comedic reliability. Whenever an asset starts to move, the subscriber questions start rolling in…

Should we be adding more? Is it too late?

It happened with uranium. Gold. And most recently silver. And given everything going on in energy markets right now, we’d wager oil is next.

Here’s the thing…

The time to buy these things is when nobody wants to touch them. When the press is busy eulogizing the sector and when sector ETFs are being shuttered. That’s the window. And yes, it’s always obvious in hindsight.

Once an asset has doubled or tripled, the question is no longer whether to buy. It’s whether to hold or start quietly offloading.

And when the financial press starts running headlines like this, you usually have your answer…

Now, here’s how we approach all of this here at Capitalist Exploits HQ…

Think in relative opportunities, not price targets. The right question is never “it’s up 100%, should I trim?” It’s “is there something out there today that’s clearly better on a risk/reward basis?” Trimming is almost always done to fund a better idea… not because a line on a chart went up enough.
Focus on valuations, not just price. A stock that doubles but also doubles its earnings isn’t more expensive. It’s still the same price. We trim when valuations look stretched and something else looks considerably cheaper by comparison.
Let position size do the talking. A 2-3% allocation that’s done well? Probably fine to leave alone. A single position that’s quietly ballooned to 15-20% of the portfolio? Probably a good time to take some off the top and redeploy it somewhere with better asymmetry.

After meaningful runs in uranium, gold, silver, and parts of the energy complex, the universe of “nobody wants to touch this” assets has gotten noticeably smaller. But it hasn’t disappeared.

There are still assets that are sitting in the penalty box while everything else gets bid up (more on that in a second).

🛢️ THE ENERGY PLAY HIDING IN PLAIN SIGHT

Speaking of assets that still offer plenty of asymmetry…

We touched on Brazil last time around, specifically how it was one of the cheapest stock markets on the planet.

That was before the incursion into Iran lit a fire (pun intended) under energy markets. Now, you might be asking: what does a Middle East flare-up have to do with Brazil?

As it turns out, quite a lot. Because Brazil isn’t just cheap as chips. It also happens to be among the least exposed countries to energy shocks of any major economy on the planet, as the following chart shows (h/t @jackprandelli)…

And some more context…

Now, cheap assets can always get cheaper. Over the years, Brazil has tested the patience of more than a few investors.

But when the valuation case is this compelling and the macro setup starts moving in your favor, it’s worth taking a closer look. And also, when one of the greatest macro investors alive is putting real money behind the same thesis… well, that’s not nothing:

Also, a shameless plug: if you’re an accredited investor looking to capitalize on rising energy prices through deeply undervalued assets, our Argentina private equity deals were built for exactly this environment.

🔌 PULLING THE PLUG ON EVS

There’s something off with the whole “EVs are taking over the world” narrative. We can’t quite put our finger on it…

Maybe it’s that trotting down to your neighbourhood EV dealer with your soy matcha latte in hand means buying an expensive iPhone on wheels (and we all know what a 5-year-old iPhone is worth).

Or perhaps it’s that the vegan electricity you’re charging it with is imported from Indonesian coal mines, costs more than the planet-killing V8 you traded in, and the government subsidies making the whole thing remotely palatable are now increasingly being pulled.

Or maybe it’s simply that most people just don’t appreciate being told to switch cars because the ESG zealots said so.

Whatever the reason, the way we see it, it all boils down to one simple truth…

When it comes to their wallet, most folks don’t give a pig’s arse about saving the planet. And that, friends, is where the EV story stumbles, trips, and smashes its face into a brick wall of reality. Here’s just a smattering of headlines from the past couple of weeks…

Lamborghini pulling the plug (pun intended) on their first EV:

From the article:

“The Italian supercar maker announced the Lanzador project in 2023, but its release had already been delayed by a year to 2029. The company’s CEO told The Sunday Times that ‘the market and customer base are not ready’ and that all-electric engines could not yet deliver the ’emotional experience’ that its customers want.”

GM also can’t make the numbers work out:

And even our sake-drinking friends couldn’t turn the whole ESG shullbit into profits. EVs managed to drill a hole in Honda’s finances for the first time in the company’s 80-year history.