Cycle Bottom Profile picture
Nov 11, 2022 8 tweets 5 min read Read on X
Thought of the day: Fighting #commodity price tops will just result in 75% plus stockprice retracements, #cyclicality music always stops, grab a chair early to avoid serious regrets and portfolio destruction. Easy clue to follow, is 65-80% margins above cost curves are peakish.
Those #commodities that are currently near bottoming (0-20%) for the next up cycle 2H2023-2025....

#tin -65%
#ironore -66%
#nickel -60% (moving up)
#Lumber -72%
#zinc -40%
#HRCSteel -67%

Know where you are in the cycle....
1st Quartile candidates for the next cycle...
A deep recession would see industrial metals decline to costs curves or into negativity for high cost producers, this is often around 75% down from 2021 peak levels.

Note we need to take into account those with historic low inventory levels currently.
#Commodities
#cyclicality
Generally zero or negative margins (supply shut down incoming) with low global inventories (lack of dumping overhang) offset with immediate recession demand destruction = #commodity bottoming 1st Quartile entry points

Demand destruction can offset low global inventories in S/T.
#ironore cycle 2H2023-2025

1st quartile $40-90/t = high probability of 4-8x gains in pre-production plays

2nd quartile $90-$140 = 2-4x returns

3rd quartile $140-$190 = 1-2x returns

4th quartile >$190 = high probability of 0-75% loss
#tin cycle 2H2023-2025

1st quartile $12k-18k = high probability of 4-8x gains

2nd quartile 18-28k = 2-4x returns

3rd quartile 28-38k = 1-2x returns

4th quartile >38k = 0-75% loss
Newcastle #thermalcoal cycle 2023

1st quartile $40-90/t = high probability of 5-10x returns from pre-production plays

2nd quartile $90-$130 = 3-6x returns

3rd quartile $130-$170 = 2-4x returns

4th quartile >$170 = high probability of 0-75% declines

#coal

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More from @BULLReturns

Feb 28
$AEE #Tiris FEED study - note the NPV using $100 spot at Full Recoverable resource (post the new additional drilling program) is > A$1.5bn or $2 per share. Next steps Resource upgrade, Followed by Offtake and Financing over the next 6 months. #uranium Image
The A$520m NPV (@$80) is based off < 50% of the 2024 incoming resource....

Hence 70c per share diluted will move to $1.40 or $2 if $100 LT #uranium pricing is used.
Shaping up well #uranium $AEE

Extras
- Ability to grow the resource 5x given the new tenements
- Ability to scale up production to 3.5-5.0mlbs as the resource doubles through 2028 Image
Read 10 tweets
Feb 27
Wow our #bitcoin miners are flying 8x returns over 14 months of holding time.

$60k = 9x

$65k = 10x

$135-175k = 15-18x

#repeatablecyclicality
Note how running multiple asymmetric themes cushions the volatility in ones overall portfolio

#uranium -20%
#bitcoin and miners an average of +30%
Our $GBTC on its way to $100 in 2025 #Bitcoin Image
Read 9 tweets
Feb 26
#RepeatableCyclicality requires an exit as well as a fresh asymmetric entry. The cycle dictates ones position, nothing else.
How to avoid destruction in cyclicality investing:

a) Understanding the cycle is the 1st key to everything

b) Scaling in near cycle lows

c) Scaling out near near maturing cycles

d) Running multiple cyclical themes, with 5-7% exposure on entry provides balance & safety
By the very nature of being cyclical, scaling down in the 4th quartile of any cycle is key..... 80% of performance generally relates to spot #commodity prices and hence margins which are >2x the cost curve.
Read 4 tweets
Feb 25
Remember those who said the ban wont be removed Vs those of us who said skate to where the puck is going, not where it has been #uranium $AEE $DMX
Combine 2bn lbs resource at < $30 AlSC post credits = > $50bn of CF over 30yrs from 2029.
#Swedish #uranium ban removal then licensing streamlining $AEE

Remember this NPV is based on 3% of the resource.... its a monster. Image
Read 4 tweets
Feb 21
#PreciousMetals masterclass incoming today.

85% probability that #gold then #silver with move higher in 2024

Selected micro caps will deliver >7x returns
Step one: Timing the scale in

The Bottoming scale in process, ideally is a mix of the following:

a) >90% falls from peak
b) near the last capital prior to the spots breaking higher
c) cap < 5% of NPV
d) a good project matrix usual the > 50% irr at current spot, >100% at peak
b) near the last capital raise prior ...
Read 11 tweets
Feb 18
Our Investing Methodology in one post:
#RepeatableCyclicality
Scale in 0-7 minutes on the cycle clock
Scale out 50-60 minutes on the cycle clock
The return between >8x

Stick with the highly cyclical sectors & niches... history provides continuous repeats.
Our Stock Selection process in one post:

>93% falls from peaks

Cap < 5% of NPVs 2-3yrs out

Project matrix >50% IRRs at mid cycle spot assumptions, >100% using peak spot assumptions.

Sentiment: hated, expectations extremely low

Spots trading below cost curves

4-5 per theme
The next 4 plus asymmetric themes to engage with in 2024:

#Lithium

#CRE

#Chinese stocks

#Potash

#Industrialmetals

#Preciousmetal microcaps
Read 6 tweets

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