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.
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


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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

- 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

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:
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:



#Chinese stocks



#Preciousmetal microcaps
Read 6 tweets

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