For my next Best Picks for the remainder of 2022 -- as the year is shaken up by the war on Ukraine and raging inflation -- allow me to introduce my new portfolio: HOAX 2.0.
My HOAX portfolio has risen majestically with a 39.3% gain since inception on Dec. 23 vs. an embarrassing 38.0% plunge for HOAX's benchmark, Cathie Wood's Ark fund (ARKK) in that timeframe. It is time to reassess.
The statements by Federal Reserve committee members this week added to the release of minutes from the last Fed meeting to paint a clear picture: As inflation ravages the U.S economy, the Fed will finally stop interfering in the bond markets. The law of the jungle tells you that lack of incremental demand will cause prices to fall, and the bond market is getting hammered this week, as it has been for most of 2022.
So high-duration names like Big Tech are less valuable, relatively speaking, and commodity-producing names are the opposite. HOAX has benefited from this Fed- and Putin-driven round of inflation and I am not selling a single name for any of the clients who have signed up for my asset management service.
So, what's next? Higher commodity prices, across an incredible range of commodities. From crude oil to manure (yes, I read that in a Reuters article this week) prices for real assets are rising. With HOAX, we captured that via the energy big boys, Exxon (XOM) , Chevron (CVX) , and Petroleo Brasileiro (PBR) , the coal names (Arch Resources (ARCH) and Peabody Energy Corporation (BTU) ) the LNG names (Cheniere Energy (LNG) and Flex LNG (FLNG) ) and smaller niche names like Suburban Propane Partners SPH, Tsakos Energy Navigation Cum Red Perp Fixed to Fltg. Preferred Shares Series F (TNP-F) and Antero Midstream (AM) .
HOAX 2.0 officially launches today, based on last night's closing values, and here are the names:
KNOT Offshore Partners (KNOP)
Equinor (EQNR)
Hess Corp. (HES)
BHP Group (BHP)
Vale (VALE)
Largo (LGO)
Yara International (YARIY)
Nustar Energy Cumulative Redeemable Perpetual Fxd Fltg Pref Shs Series C (NS-C)
Safe Bulkers Inc 8.00% Preferred Shares Series C (SB-C)
GasLog Partners LP Preferred Shares Series A (GLOP-A)
Yes, while the world worships Silicon Valley, I have included not one, but two, names headquartered in Norway. I dare to be different. But who could argue against Equinor's massive asset base, especially in the North Sea and resource bases that is nearly 50/50 gas? Yara produces fertilizer and its components, urea and ammonium, that Russian President Vladimir Putin has put in short supply, much to the detriment of the world's farmers -- and those of us who eat the food they produce.
Hess is included, as HOAX has less exposure to oil majors, but not none. Vale and BHP give exposure to non-hydrocarbon-based commodities like iron ore and nickel, as well. Prices for both have skyrocketed in 2022, with nickel's crazy spike drawing much media attention.
Largo Resources is the most speculative of the group and also the only one that doesn't pay a dividend. I love Largo's position in Vanadium with both a Brazilian mine and the technology and capacity to produce vanadium redox flow batteries. VRFB's are a strong alternative to Elon Musk's Tesla (TSLA) Energy Megapacks for the stationary energy storage space.
After that, HOAX 2.0 gets conservative and with cash flow, as the overall portfolio is currently yielding 6.6% on a blended basis. So, there is an oil tanker shuttling business, which gives HOAX 2.0 a huge play on the move of oil drilling offshore -- in Brazil and Guyana, for instance -- a theme I have covered in many columns. That is Knot Offshore Partners L.P., (KNOP) .
Then we have three "preferred" names, with shipping taking the fore, with Safe Bulkers representing dry bulk and GasLog Partners, representing LNG. Finally, there is NuStar Energy's Preferred Series C, which gives us exposure to the U.S.' natural gas boom and the extraordinary jump in natural gas prices that we have seen in 2022, including another step higher this week.
So, 10 names and a yield of 6.6%. Picking on Cathie is so easy these days that I have decided to give HOAX 2.0 a much broader benchmark, Invesco's Nasdaq exchange-traded fund (QQQ) .
HOAX has been an extraordinary journey this far. So, I figured l, why not take a thematically similar but tactically different route and add more fixed-income names. The U.S. equity market scares the hell out of me, and I am worried about collateral damage if there is a Nasdaq crash.
