A quick saunter through a smorgasbord of interesting events and observations.

First off, a must-attend event next week.

Next Wednesday, ETF Stream has a fascinating event on fixed income ETFs – timing is fascinating given where we are with tapering and inflation worries. My favourite session is early on with Cross Border Capital’s Michael Howell who is always fascinating on big picture thinking. That session is on at 0930 I think.

In terms of the broader range of panels, some of the key issues discussed includes :

  • The current macro environment
  • New ideas in the search for yield
  • Selection and innovation with bond ETFs
  • The rise of fixed income ESG ETFs

Event details:

Date: Wednesday 22 Sep 2021

Time: 08:30 – 15:35

More details and registration (free) at https://www.etfstream.com/events/big-call-fixed-income-etfs-2021/

Uranium rises in price

Hat tip to Nick Lawson at Ocean Wall here. My FT column on nuclear power and uranium is playing out as I expected. Hope you bought some Yellow Cake as I suggested. Here’s a good summary from Ocean Wall:

’The uranium price has surged to the highest level since 2015 due in part to a single fund aggressively cornering the physical market. Investment firm Sprott Inc. earlier this year launched its Physical Uranium Trust and recently commented on Twitter about how much physical uranium it had been buying, aiding to the commodity’s recent bull run. Sprott has amassed over 24 million pounds of uranium, sometimes buying more than 500,000 pounds in a single day, according to its website and social media accounts.

‘In comparison, total spot volume for 2020 was 92.2 million pounds, according to uranium investor Yellow Cake Plc. The buying is in addition to already bullish fundamentals. Uranium prices must rise further to spur the restart of production to meet uncovered utility demand after 2023, according to analysts at Raymond James Financial Inc. Earlier this year, NAC Kazatomprom JSC, the world’s top uranium miner, said it would keep its output at reduced levels through 2023, removing supply from the market.

‘Energy costs are rising around the world as the recovery in demand from the worst of the covid-19 lockdowns collides with supply constraints. Power plant fuels — including natural gas and coal — are surging to new heights, making it more expensive to operate factories and keep the lights on at home, compounding the inflationary pressure already resulting from strained supply chains. Uranium futures on Nymex surged by 15% last week, making it the best weekly gain in more than a decade and before the 2011 Fukushima nuclear disaster crashed demand for the commodity. The spot price for U3O8 moved above $30 per pound for the first time this year at the end of March. Reports by BMO Capital Markets and Morgan Stanley predict a rally in prices over the next few years to the ~$50 level by 2024.’

Cheapest Gold ETF

The Global Palladium Fund (GPF) has reduced the total expense ratio (TER) of its gold ETC from 0.145% to 0.12% making it the lowest physical backed gold fund globally.

According to GPF ‘of the 12 other physically backed gold ETCs listed in Europe show that annual fees range from 0.4% to 0.15%, making them between £2,800 and £300 a year more expensive on a £1m investment compared to GPF’s Gold ETC.  The corresponding figures for an investment of £100,000 and £10,000 are £280 and £30, and £28 and £3 respectively.’

A cheap Oil play

Interesting observation from US equities manager Arbrook on US unconventional shale play Diamondback.

We believe Diamondback can earn over $1,600bn of free cash flow in 2022 if the price of Brent crude oil remains above $65 as the global economy continues to recover fully from the pandemic. This places Diamondback on a potential free cash flow yield of over 12% and an expected 2022 P/E of 7x at the current stock price. We believe Diamondback was one of the earliest large domestic players to fully align management incentives with return-oriented metrics as opposed to production or reserve growth – something many of their peers have emulated in recent quarters’.

Still juice left in semi-conductors

The BlueBox Global Technology Fund managed by Willian De Gale is always worth watching for his slightly idiosyncratic approach to technology investing. I note two observations from their most recent fund commentary:

  • They continue to avoid all Chinese stocks – ‘The Chinese government continues to threaten the independence and profitability of its internet and e-commerce companies, and we are not tempted in by weak performance or apparently low earnings multiples’
  • Hugely over weight semi conductors – ‘orders for semiconductor equipment remain extremely strong, while the leading semiconductor foundries, Taiwan Semi and Samsung Electronics, are both reported to be increasing their prices, a very unusual occurrence that indicates extremely tight supply. This continuing shortage of semiconductors indicates that the Technology sector remains in rude health’.

Top ten holdings for the Blueback fund are below. I’m invested in two on the list – Microsoft and MercadoLibre.

Microsoft 5.7%
Adobe 4.5%
LAM research 4.2%
Applied Materials 4.1%
ASML Holding 4.1%
Synopsys 4%
MercadoLibre 4%
Cadence Designs 4%
Samsung Electronics 3.5%
SECTOR composition
Semiconductors 39%
Software and services 32%