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Cycle Bottom Profile picture
@BULLReturns
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

Cycle Bottom Profile picture
Nov 11
As our followers will recall, we used $GBTC at its 50% disc near cycle lows to achieve our #bitcoin exposure, our scale down for this cycle commences at $84k through $135k over the next 12 months. This will equate to >10x returns from GBTC over a 3 yr holding period from 4Q 2022.
The cycle continues to dictate our 10 bagger position, as it should do for our followers.
This will also complete a full exit from our #bitcoin miners, that were not fully scaled out at earlier 2024 peaks
Read 5 tweets
Cycle Bottom Profile picture
Nov 1
Pre-production micro cap #Commodity stocks rules to adhere to:

A) drill program to scoping study

Dilution funding (up cycle): 30%
Elapsed Time: 18-24 months

B) SS to Pre-feasibility

Dilution: 60%
Elapsed: 18-24m

C) Pre-feasibility to DFS/BFS

Dilution: 80%
Elapsed: 12-18m
D) DFS to production (compelling project)

Dilution (cumulative) 90% plus
Elapsed Time: 30-48 months

Total elapsed: 76 to 114 months

For a downcycle one can double the dilution.
<3% of projects are compelling
=

Scalable resource

IRRs > 50%

Location has existing infrastructure

Low on the cost curve

Capex intensity mild

Can move into production this cycle

Won't dilute shareholders down to near zero
Read 4 tweets
Cycle Bottom Profile picture
Oct 17
Without regards for the cycle, 10 baggers are mythical beasts.... With regards to the cycle they are 30% probabilities 🎯 with the following characteristics..

A) down > 95% from the previous cycle peak
B) trading < 3% NPV near cycle lows
C) implied 3-4yrs out trading on <0.4x CF
Active example there will be over 20 10 baggers from the #lithium space from recent cycle lows through the 2027 cycle peak.

Note the amount of 10 baggers from 2020 lows through 2021/22 highs compared with 2022 highs through 2024 lows.

The #cycle is everything
Recent China Real estate stock moves, many did >500% (even a few 10 baggers) in a < 2 months from being down >99% from cycle peaks.
Read 9 tweets
Cycle Bottom Profile picture
Sep 29
Top positions for us are ones near exiting as they have performed so well, where new top positions come in at 2% and can move to 15% by outperformance. Old asymmetric themes have performed and are on the chopping block, this is how to play cyclicals.
Cyclicals trading > 8x 2027 peak CF are an exit, those trading <0.3x are an entry.... Knowing the difference is the art work.
Only near cycle bottoms offering fresh asymmetric themes trade at <0.3x 2027 peak CF.... We can tell you what that isn't, most state their current major holdings which are over > 50% on their respective cycle clocks will deliver, they totally won't.
Read 5 tweets
Cycle Bottom Profile picture
Sep 28
Feasibility studies are conducted by profession enterprises with much experience, the AISC is an equalizer on the value of a #uranium pound, as is the project IRR, to say otherwise indicates ones lack of comprehension

We prefer at surface low grade, with high mill feed grade....
It should be remembered:

High grade at depth can have many issues

ISR annual capex is opex and should be treated as such

Credits can be very important is net costs

1st Tier AISC project < $36 in 2025 will likely move to <$40 by 2028 and <$44 by 2031

#uranium
Jurisdictions which take 10 yrs to permit are not very favorable #uranium

Hence we prefer Africa Vs Canada
Read 4 tweets
Cycle Bottom Profile picture
Aug 3
For our followers: Now that the sky has started it's fall and you have stocked up on dry powder as we have guided, the next step is to review watchlist entry points. It's key one moves to a Greed mode over the next 6 months as markets bottom, removal of Fearfulness.
Some massive compelling cycle bottoms will occur in such industrial commodities such as #lithium

Look for...

> 95% declines from peak
Cap < 3% of NPV
Cap < 30% of Cash flow 3-4yrs out
IRRs > 40% on $25k pricing

= > 10x returns

Don't be surprised if 2020 lows are achieved.
As retail investor become extremely fearful they will often sell out at extreme lows with no rational consideration for mid to long term value, historically this has presented our best entry points for >10x returns. This will assist in us selecting our last leg for 10x10x10=1000x
Read 5 tweets

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