hugomanenti95 @hugomanenti95: "Dear all, I hope this finds..."

Portugal

Dear all, I hope this finds you well! May was busy, kind of mixed but certainly a step in the right direction. Let's review what happened. 𝗜. 𝗠𝗮𝗰𝗿𝗼 As anticipated, data releases were a little better in May, with softer inflation amid resilient growth. As I said in my last post, this is really what the markets needed to see. Although resilient, the US growth outlook appears a tad more muted, with a slowdown in residential investment, as well a as weakening fiscal impulse. The job market continues to normalise, albeit slowly, and customers are still in an overall excellent shape. China and Europe are rebounding noticeably, which has contributed to an increase in commodity-related sectors, as well as an outperformance of their equity markets vs. the USA. April US PPI and CPI came a bit softer than previous months, and it is a trend that I expect to continue until at least Q3. In addition, Q1’24 inflation was revised lower, providing further fuel to equities yesterday. Today will see the release of the PCE indicator, which should confirm the continued disinflationary trend. Policy remains supportive of equities as well, with the European Central bank expected to cut rates next week and the Fed still leaning dovish. Worth noting though – the Treasury (Janet Yellen) and some Fed members have recently expressed increased hawkishness. In a nutshell, the backdrop remains supportive for stocks, with robust although slightly slowing growth, continued disinflation, and supportive policymaking. Thus, my outlook remains cautiously constructive. I am watching out for a couple of risks though – large cap overvaluation, accelerated economic slowdown, and further uncontrolled rise in yields. 𝗜𝗜. 𝗠𝗶𝗰𝗿𝗼 – 𝗘𝗮𝗿𝗻𝗶𝗻𝗴𝘀 ✅ $CROX (Crocs Inc) was our star performer this quarter. The Crocs brand is on fire, particularly internationally. Fad? Nope. The Heydude brand is a work in progress and the hiring of Terence Reilly as its new CEO is fantastic news (he made the Stanley Cup viral, and prior to that, Crocs). ✅ PUMP, ACDC, MTDR and OVV performed a little better than expectations, and had a decent month considering the drop in oil prices. ✅ Non-residential construction remains robust and despite some minor snags, ATKR and WCC are doing reasonably well, especially given their incredibly low valuations. Electrification is supported by massive long-term tailwinds (AI / datacenters, automation, energy production and distribution, solar / EVs, etc.) that are only starting to play out. ATKR is looking increasingly attractive, and I am increasing our allocation. ✅ In semiconductors, we reduced our exposure given valuations - admittedly too early. Still, $AMAT (Applied Materials Inc) continues to be a top performer in the critical semicap space – with its tools empowering next-generation semiconductor manufacturing. There too, tailwinds are massive – AI, reshoring being the key ones. MKSI and LITE are two small bets that are a little earlier in their cycle and could see massive growth acceleration later this year and next. ✅ In utility-scale solar, $NXT.US (NEXTracker Inc.) was a standout performer, and this is now our second ride with this fantastically well managed company. We also added ARRY as its backlog growth shows it is close to an inflection, and its valuation is extremely attractive. ❌ BLDR reaffirmed guidance but dropped 25%... offering an opportunity to add back some of the shares we previously sold. Higher rates are impacting homebuilding activity but this is the third rate spike since 2021 and the company has always come out of it stronger. Not as cheap as it used to be, but a great company nonetheless. 𝗜𝗜𝗜. 𝗣𝗼𝗿𝘁𝗳𝗼𝗹𝗶𝗼 𝗣𝗲𝗿𝗳𝗼𝗿𝗺𝗮𝗻𝗰𝗲 We remain slightly ahead of the $SPX500 and well ahead of the $RTY this month and year to date. There’s a lot of dispersion between asset classes and single stocks which is making things a little hard to manage but also presents us with many opportunities. Of note: ✅ Solar finally caught a bid, likely on the narrative of AI electricity demand. It was spectacular – well worth the many months of stalking it. ✅ Crypto and gold / silver continue to act very well based on several factors – emerging markets reducing USD holdings, uncontrolled government deficits and central banks’ unwillingness to do what’s required to bring inflation back to 2%. ✅ Commodities benefiting from China / Europe bouncing back and AI demand are doing well, and we did a good job adding them to the portfolio earlier this year ❌ Interest rate related equities are still struggling… patience. 𝗖𝗼𝗻𝗰𝗹𝘂𝘀𝗶𝗼𝗻 Our portfolio is performing as expected, while the macro outlook remains supportive. A further softening of inflation could finally help small caps catch a bid, which would be tremendously helpful to us. Absent that, we have still been able to generate above-market performance, and should continue to do so. Please let me know your questions! All the best, Hugo

5 Mentioned

CROX

Crocs Inc

AMAT

Applied Materials Inc

NXT.US

NEXTracker Inc.

SPX500

RTY