2024 Year End Review

Doing a portfolio review a few days early as of Dec 19th. My portfolio is -6.57% year to date, which is embarrassing. There's not really a point in being an active investor if you can't outperform passive ETFs. There's really no point if you are going to lose money. It's a very different review than last year where I was +34.48%. How much of last year's overperformance and this year's underperformance is due to skill or luck?  That's the eternal question.  

I'll do a separate post on how I'm positioned going into 2024.  Many of the names listed here have been closed already.  Without further adieu, me eating humble pie:

Lithium

OK, I got my butt handed to me by a single commodity. If I hadn't invested in lithium I would have had a good return in the rest of my portfolio, espeically if I include not just the direct losses but the opportunity cost.

The lesson here is in commodities cycle timing matters. I started in lithium after the price was down quite a ways, but the spot price was still above most of the cost curve. Mines hadn't started shutting down yet.  To stop the freefall in price supply has to come out. I thought this would be different due to the rapid growth in demand volume, that a slowdown in supply increase would be enough. That was wrong.  The four most dangerous words are "this time is different".

Amongst these companies are some great management teams and some pretty questionable managament teams. Everyone got destroyed. When your industry gets hit by a tsunami it doesn't matter if you are a good swimmer.

Royalty

If I included Lithium Royalty my royalty investments were net negative, so I didn't add a lot of alpha in a year when gold was way up and following my own advice of investing in the big 4 (Franco, Wheaton, Royal, & Triple Flag) and holding would have outperformed what I did.

My Deterra investment is new and hasn't had time to play out.

None of my royalty takeover target strategy companies got taken out (EMX, Elemental, Osisko, Sandstorm). Trident did get taken out, though if you include last year it probably is a net loss for me. I sold Trident after the offer pre-merge and bought Deterra at significantly lower prices than they were at merger time.

Overall this was fine, no complaints.  Sometimes to be a good fisherman you just have to fish in the right spot. You can be bad at casting and setting the hook and all the skill things, but throwing your lure into where there are fish and you'll catch fish. Royalty is a good place to fish.

Non-Resource Stocks

Stitchfix and Solaredge were a lack of investment discipline, the others were investments I'd consider to be sound strategy and process. Sometimes it's important to focus on process and there will be years where outcome doesn't happen.

Aercap is a long term holding I hope to hold for decades. Sometimes it gets very cheap and I buy more and sometimes it gets fully valued and I trim, but I like to keep a full sized core position. People underestimate how good of a business it is.  I continue to look for additional specialty finance companies to invest in.

Camplify is a classic two sided marketplace company focued on letting people rent out their camper vans, motor homes, and the like. They had a bumpy year integrating another company PaulCamper, but their core markets are still strong and the business model is solid with a good take rate and robust network.

Yelp is a long term holding and another 2 sided marketplace. They are building more and more small business features that diversify their revenue away from traditional advertising.

Despite losses in Camplify and Yelp I continue to look for reasonably priced 2 sided market place companies to invest in.

Solaredge was a mistake. I have previously held this one and found them to have innovative differentiated products and top notch management. I thought I was buying in to a company built to weather a down market in residential solar in Europe. Instead the company was way over extended with many new products that weren't up to it's normal high standards.  There have been lots of management changes. As I get more disciplined companies like this shouldn't make the cut.

MDU was a special situation play on getting a re-rate on the splitting of the construction services and infrastructure owning parts of the company.

Some otherwise brilliant people can't quit smoking cigarrettes. Stitchfix is my cigarettes, it's bad for my health and yet here I am. Mostly I got lucky in some less terrible than expcted quarterly results caused a 45% single day short squeeze. Luck shouldn't be considered an investment strategy.

Project Generators

Midland was in the lithium section, I had high hopes for Elrond which turned out to be nothing and Galinee disappointed. Plus the backdrop of lithium. Salazar isn't a pure project generator but kind of fits here in a way.

Kenorland I bought on the way down and backed up the truck when it traded in the 50s and 60s and then trimmed on the way up. I continue to trade around a full sized core position that I hope to hold for many years. This management is top notch and the company is as close to ideally executing on the business model as I've seen.

Sable had a bunch of projects in Mexico that got crushed by the government there and their main JV did not have good drill results. But I think I was buying in when their market cap and cash were pretty similar levels. I got a little lucky in that some retail investors with a following gave it some mention and brought in some impatient investors that allowed me to provide liquidity both directions.

Strategic Metals continues to lumber along but my hope of Broden going forward being a catalyst never happened.  Recycled money elsewhere.

Post Discovery Hole Explorers

I'm getting better at this style of investment, but it's a wild rollercoaster ride. I am also still learning.

I bought $NGEX.TO after the Lunahuasi discovery hole and sold at $10.35 when it looked like the main porphyry was going to be stupid deep under that cliff, it's now $13.18.  That high grade vein zone is awesome and I likely should have just kept holding. I've made that mistake before making small profits selling too early on their tier 1 projects.

$ARIC.V I bought on the mind blowing Charger hole. Charger is looking like it will be low tonnage, hence the stock price getting cut in half. However BBM looks huge and they have an entire district sized land package so I still have a position and following.

$AE.V I've traded around a core position trimming on runs unrelated to project development and adding on dips with lack of news. If the entire thing went to $0 today I'd walk away with a profit and I still have a full sized position. In the meantime we wait on assays on hole 35 to see if the north zone pans out.

Q2 Metals in the lithum section could also fall here and bring the totals down, though not too terribly.

The Miners

Repeat after me, miners are for trading, not buy and hold.  You may look at them and say wow they are earning a lot and are so cheap, I could hold these forever. Don't fall into the value trap.

Lithium Argentia could could as a miner in startup, but is in the lithum section.  Same with Sigma.

Alphamin and ERO completed expansion projects. Alphamin's returns also don't include an approx 10% dividend. Warrior is also doing an expansion with the building of Blue Creek, I think the lesson there is one I know theoretically but could repeat of: the market doesn't give credit for the expansion until it starts producing, until then it's just a drag on profitability.

Jupiter was a bet on Mangenese price going up when a typhoon took out the dock for a mine that produced 10% of the worldwide supply. Unfortunately I quickly learned there is an excess of low grade Manganese supply just sitting around in stockpiles and an apparent excess in refining capacity. There's a lesson here about being toursit capital in a commodity market you don't understand.

VALE has world class assets and infrastructure. I took a small loss as the iron market turned sour and I exited, then I recently re-entered a half position at a lower price. I also re-entered ERO at a lower price after exiting.

It's clear I have a lot to learn on trading miners.

Pre-Production Sweet Spot

Atlas was believed to be in this zone, but I violated the rule and bought before permitting. It's in the lithium section. Rio2 I had previously bought before permitting or financing and got burned on permitting, I'm only -12% after buying back in after permitting and financing. Lesson learned there, must have both permitting and financing.

These were established pretty late in the year and haven't had a chance to play out, so I'm not at all worried about the dip, if anything it's an opportunity to add.

Misc

Osino was a quick unhedged merger arb because sometimes I like to pick up nickels in front of steamrollers.

Salazar I could write a book on the saga that is Ecuador. This blog started to discuss the development in that country where you can walk up and hit undrilled porphyries with a hammer that looked to be opening up to outside investment. It's been a bumpy ride and exiting Salazar was the last investment I had in that country. The blog now discusses other mining investment topics that are with any luck a more productive use of time.

ZCCM & Red Hill. These were in my hidden royalties section. Red Hill re-rated as Onslow went into production and I decided to take the win and move on rather than hold the company long term. ZCCM continues to be an enigma wrapped in a riddle wrapped in a question.

Trilogy. Had I held this would have been one of my big winners as the Trump election renewed hope of permitting the road. Instead it was mostly wasted opportunity cost of the time and effort spent on it.