The Playbook To Combat Inflation. ROI Monthly: Feb 2023

Plus, an overview on this royalty company with a 149% upside on target price.

Review - Feb 2023

Firstly, welcome to all the new subscribers.
It’s a pleasure to have you onboard during these most interesting times.

The two assets I’m most interested in currently are the US10yr yield (seen below) and the front month crude oil futures (below that).
MTD we’ve seen an increase in the 10yr of approx. 12%, vs a decline in CL of approx. 5%.
Incredibly, the SPX has still held it’s ground to be slightly up on the month, a trend I do not expect to continue given the increase tightening of liquidity across the board.

So what now?

In last month’s edition I wrote “ The FED continue their upward trajectory on rate hikes, albeit at a slower pace. This IMO will continue to accelerate the tightening of liquidity in capital markets leading to broad-based selling pressure in general for equities. I expect Q1 2023 to provide excellent entry opportunities for select stocks whose cashflows will be relatively resistant to the expected broader economic slowdown..”

So far, that’s exactly what’s happened.

And although such volatility isn’t comfortable, it is a necessary ingredient for outperformance.

I am continuing to hold large liquid reserves, mainly in USD and 0-3 month T bills waiting for the possibility of entering into my favourite stocks at lower prices.
One stock I have my eye on is examined in depth in the next section.

Ben’s Buys.

What’s Ben Buying This Month?

In this segment I give you my take on a particular stock, including my investment thesis and valuation estimate.

To survive this inflationary environment it’s no secret that I’m looking for companies that can have exposure to growing revenue streams, without an associated increase in expenses. Royalty companies are an excellent choice for such an environment as their revenues are based on the top line sales of their associates, rather than the net profits.
Royalty agreements are generally provided by financiers, who lend to explorers and producers in exchange for an agreed cut of their future revenues.

The beauty of this model is that once the agreements are drawn and the finance completed, there’s not much left for the royalty company to do but sit back and collect their royalties.

This makes them a less-speculative way to gain exposure to commodities generally as the often can run on very little staff and have very low fixed and variable expenses.
In the video below I give a complete overview of one such company which I think can deliver outstanding returns, without the risks normally associated with the producers.
Subscribe to the ROI club today and become a member and gain access to ALL of my analyses + see a live performance breakdown of the stocks I’ve looked at in the excel sheet below ( currently up 13.33% at time of writing).

ROI CLUB PERFORMANCE TRACKER

Until next time, all the best & DYODD.

Benjamin.