Q&A Series: Investing in Critical Minerals and Energy (Installment #2, Questions #5 - #16)
I wanted to post another set from the trading Q&A, as I continue working through them.
This is a continuation of the post yesterday on the Q&A event, which you can find here.
A Few More Q&A Responses Below (#2-#11)
#5 from Casey: What have you found to be the best sources of new information? Teach a man to fish!
I have a rather diverse pot. I check the federal register daily to scan for any policy changes or hints at upcoming funding pipeline or regulation amendments that are relevant. I check congress committee hearing schedules and the white house calendar often as well (and like to dissect executive orders thoroughly as well as relevant legislation text that seems poised to pass or garner support).
Increasingly, I’ve had to look at government sources outside of the USA to get a pulse check on what is happening with intergovernmental cooperation. Since those can be in languages besides English, I use different translation tools there. Often, these efforts don’t lead to much - but every now and again I learn something valuable that I can use for my trading.
Besides all this, I run sweeps on Reuters, Bloomberg, WSJ, the usual suspects.. If I am doing hedge fund analysis, I look at quarterlies and any changes when companies report a large change in ownership (5%<). I also check EDGAR for filings if I suspect something might be up soon and comb over earnings for any crumbs on what might be happening near-term. For my favorite companies, I also scour for interviews, conferences, and I sweep the socials and linked-in profiles for their executives and board members. Did you know that Energy Fuels leadership was in Korea and Malaysia around the time + after APEC in late October?
#6 from Jeremy B: What are your big bets right now with continued back and forth with china? Are you expecting UAMY to get back above $15?
My position here is largely what it’s been. I see negotiations with China as providing short term support to the USA and their supply needs in exchange for pain in my portfolio 😂 a sacrifice I am willing to make!
But seriously, with a longer-term mindset, I feel I don’t pay as much mind to China. I do keep up in order to anticipate if the markets are going to become more volatile or swing downwards near-term. That can influence what kinds of investing instruments I use (e.g. derivatives) and with what expiration outlook if so - as well as to decide if I should be hedging or shifting further towards theta/vega plays rather than riding delta. Overall, I have seen enough to feel assured that the administration isn’t really looking for China as a long-term option. I believe the administration has put their money where their mouth is on that (as has the house and the senate). But all the same, this doesn’t mean that markets understand or align with this perspective. As we have seen, the market reacted to the truce with a lot of downward pressure on the sector. I’m not surprised, I flagged it in my last post. This is a sector that’s been beaten down a lot. It will take time for a lot of investors to feel the area is sufficiently de-risked.
There was a comment here or on reddit yesterday about whether the supreme court rulings on tariffs might substantially impact companies here and portfolios weighted heavily into them. And that’s a concern worth taking seriously. It very well might put more pressure downwards on the sector. Again, that’s one of those areas where we have to decouple between what news actually represents vs. how the markets are likely to respond. Even if the courts strike down the broader tariffs, the government (executive, legislature) has levers they can pull. Section 232 is still an option - and there is also bipartisan support on narrow action on China when it comes to critical minerals. None of that means that the market won’t move down on the ruling, though.
Regarding UAMY, I wouldn’t be surprised on a long-term timeline but can’t speak near-term. II don’t have that much exposure in this one so I don’t track it as closely. Might be worth looking at further when I have time. But with a lot of these companies, my worries end up being more about time-horizon for a return on investment than anything else.
#7 from Zach: Hey Steve, would be great to get an overall update on where your focus is right now. My refined (no pun intended) thesis is aimed at domestic midstream players, but there are a few companies that I am looking at, specifically Pensana and Arafura, that seem to be very well aligned for great things in the 3-5 year timeframe and are on the cheap right now.