๐๐๐๐ง๐ช๐๐ง๐ฎ ๐ฎ๐ฌ๐ฎ๐ฒ ๐ช๐ฅ๐๐๐ฉ๐
๐๐๐ง๐๐ค๐ง๐ข๐๐ฃ๐๐
โข The portfolio returned -4.90% in February vs -0.87% for the SP500.
โข YTD the portfolio returned 0.12% vs the SP500 return of 0.49%.
โข The annualized return since inception of the portfolio is 21.4% vs 11.60% for the SP500.
๐พ๐ค๐ข๐ข๐๐ฃ๐ฉ๐๐ง๐ฎ
I allocated ~20% of the portfolio to oil producers as it became evident that war in the Middle East was the likely outcome. Judging by history, it seems unlikely that the war will be resolved quickly. The largest disruption is the attacks on ships going through the Strait of Hormuz. As we saw with the shipping disruption in the Red Sea, it is very hard to stop these attacks. It could well last many months, draining oil inventories globally. The probability of oil prices increasing to >$100/bbl in the short-term is high. The allocation to energy is just a hedge and I will promptly sell it if it becomes evident that the shipping disruption will be resolved.
Looking at risks to the portfolio, I am not too worried. $BFIT.NV (Basic-Fit N.V) (21% of the portfolio) could be hurt by higher energy costs, however after the 2022 energy price spike they moved to hedging their energy costs via fixed price contracts. 100% of their 2025 energy prices were fixed. We should know next week with their earnings release how much of their energy prices are fixed for 2026.
$VTY.L (Vistry Group PLC) reported results this morning and sold off by 20%. The primary catalyst seems to be the announcement that the CEO is retiring. He will be around for another year as the new, yet to be named, CEO transitions into the role. This is not really a cause for concern in my opinion. Their 2025 results were as guided, so no surprises there. For 2026, one aspect that is concerning the market is that Vistry is lowering sales prices of their open market homes. They want to clear stock from their legacy house building segment and in doing so reduce working capital. We donโt know the magnitude of the discounts. Open market sales are already 40% higher year-to-date vs 2025 so the discounts are working as intended. It seems clear that there is some weakness in the UKโs open market housing industry, likely driven by cost of living pressures on consumers. Open market sales are 25% of Vistryโs business, the other 75% is affordable housing. Affordable housing is where the government indirectly buys the homes from Vistry. As mentioned before, the annual affordable housing budget allocation from the government has increased by 60% and they will start allocating this budget around September this year. This is the catalyst for which we are waiting. Currently Vistry is trading at a Price/Tangible Book value of 0.75 and a EV/EBIT of 5x. Itโs a profitable business trading far below book value generating ROCE of 13% and they are on the cusp of a large catalyst taking effect in a couple of months. One will need to be a bit patient with this one, but the current price seems like a bargain. I have increased the allocation to 9% of the portfolio.
Once again uncertainty is high, but most of the time the world does not end. Iโm unlikely to make large changes to the portfolio during the current period of heightened volatility. As evidenced historically, the best course of action is to practice restraint and not make impulsive trades.
Best regards
Jacob... Show More
Not investment advice. The author may have financial interests in the mentioned instruments.
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