Hugo Angelo Lucien Manenti @hugomanenti95: "Q1 earnings season is now..."

Portugal

Q1 earnings season is now in full swing, so I wanted to share a few early updates from companies in our portfolio. Overall, it has been a strong start to the year. Today’s update focuses on some of the easier reports to interpret - companies where the thesis is progressing clearly. 𝗪𝗲𝘀𝗰𝗼 $WCC (WESCO International Inc) A very strong report, with a large beat on both sales and margins. Backlog is growing faster than sales, and data centre sales were up 70% year-on-year. The long-term drivers behind the investment thesis remain very much intact: AI infrastructure, electrification, power demand, re-industrialisation and supply chain investment. Guidance still looks conservative to me given the strength in the backlog, and I continue to see room for further margin expansion into next year. Anecdotally - we are up close to 10x since our initial investment in 2020! 𝗣𝗿𝗼𝗣𝗲𝘁𝗿𝗼 $PUMP.US (ProPetro Holding Corp) The stock has performed very strongly since last year’s Q3 earnings. The pressure pumping market had already started to recover after a long period of supply attrition, and demand is now improving on the back of the war against Iran. ProPetro’s new-generation fleet is already fully booked, pricing is improving, and older fleets could potentially be reactivated later this year, which would add further upside. The power opportunity is also growing fast. Strong data centre demand allowed the company to significantly expand its gas turbine order with Caterpillar. Financing may result in shareholder dilution, but the potential EBITDA contribution from this opportunity is very substantial - up to $700m of EBITDA. The market is now beginning to re-rate the stock to reflect both growth and a more contracted, stable earnings profile. 𝗔𝗻𝘁𝗲𝗿𝗼 𝗥𝗲𝘀𝗼𝘂𝗿𝗰𝗲𝘀 $AR.US (Antero Resources Corp) This was the type of report I wanted to see: lower production costs, hedged natural gas exposure, and unhedged liquids exposure. Making the most of the geopolitical situation. The company remains well positioned to benefit from stronger gas and liquids exports, especially if global energy markets remain tight as expected. There is also additional optionality from potential direct gas supply agreements with data centres in Virginia, although this is still not reflected in the numbers. The acquisition of HG Energy late last year was a home run: low price, strong strategic fit, meaningful synergies and a very short expected payback period. Excellent management, high-quality assets - now let's see if natural gas prices cooperate. 𝗢𝗿𝗶𝗼𝗻 𝗚𝗿𝗼𝘂𝗽 𝗛𝗼𝗹𝗱𝗶𝗻𝗴𝘀 $ORN (Orion Group Holdings Inc) This is the first time I write about Orion here. The company has two main segments: marine contracting and concrete construction, with a large share of the construction business linked to data centres. The marine segment appears to be at the beginning of a long-term cycle of increased port and marine infrastructure investment, which is also becoming a greater priority for US defence and supply chain resilience. Backlog is strong, and competition is relatively limited due to the Jones Act. The construction segment has historically been lower margin, but execution is improving and data centre demand is helping the business mix. The valuation remains moderate, backlog is large, and margins should continue to expand. Ideally, Orion could eventually sell the now-healthier construction business to a strategic buyer and focus more fully on marine infrastructure. 𝗖𝗨𝗕𝗜 𝗮𝗻𝗱 𝗢𝗦𝗕 Not much to add here. Both remain above-average performers trading at below-average valuations. As long as execution remains solid, I still see meaningful upside. 𝗢𝘃𝗲𝗿𝗮𝗹𝗹 𝘃𝗶𝗲𝘄 The US economy remains stronger than many expected, and several of the long-term themes I have discussed repeatedly - electrification, re-industrialisation, energy security and supply chain resilience - continue to accelerate. I will keep sharing updates as more of our portfolio companies report. Please let me know your questions and comments! Hugo

Not investment advice. The author may have financial interests in the mentioned instruments.