The sun shines. And people forget. The Who's Eminence Front is rushing through my head this morning as I read posts in the WhatsApp group I created to discuss my HOAX portfolio. Yes, my entitling of the portfolio HOAX might give you a slight inkling of where I stand on the climate change issue.
What are people talking about now? Well, of course we mentioned Tesla (TSLA) yesterday, as the company's 4Q EPS report was last night. Instead of my nerdy leanings toward margins and returns on capital, however, we're more interested in the supply of materials necessary for EV battery construction and charging/recharging efficacy.
There's the supply of lithium, graphite, cobalt (although LFP battery architectures don't use cobalt) nickel, and copper, etc. If we are transitioning to an electrified transportation fleet, where are we going to get all this stuff? Great question. Two small-caps that I have mentioned in my RM column fit well in that theme. First is Westwater Resources (WWR) , as it is developing the Coosa graphite mine in Alabama. WWR will also process third-party graphite at a facility near Tuscaloosa before that pit is completed.
Also, Nano One Materials (NNOMF) has a proprietary process, M2CAM, that allows for localization of cathode material production. NANO's process obviates the need for much of the ocean-crossing (on ships powered by hydrocarbons) of raw materials that is involved in current EV battery production.
Speaking of hydrocarbons, obviously HOAX is entirely composed of companies that deal with them, and the prices for those commodities are going absolutely nuts this week. By the end of the day tomorrow I should be beating (ARKK) and Cathie Wood by a full 40 percentage points since HOAX's inception in December.
The questions surrounding hydrocarbons are how high will they go, how long will this bounce last, and which companies benefit most from this bounce?
The front-month Brent futures contract was threatening $91/bbl this morning. Goldman Sachs and several other banks have thrown out a near-term target of $100/bbl, and I can't argue with that very round, and very easy to remember, figure.
The longevity of the bounce is difficult to measure, but let's go back to the last one. A huge spike after the GFC-related crash in '08-'09 took us back into the triple-digits by the end of 2010. That bounce lasted until the disastrous OPEC meeting the day after Thanksgiving in 2014.
This time Covid-19 was the cause of the crash, and we are still in the midst of the two-year spike period. Does that mean high oil prices will last until 2026? I wouldn't bet against it, and, in fact, I am betting for it. The three major integrateds in HOAX are Chevron (CVX) , Exxon (XOM) , and Petrobras (PBR) , and I am not selling a share in any of those.
