hugomanenti95 @hugomanenti95: "𝟭/𝟮 Dear all, I hope this finds..."

Portugal

𝟭/𝟮 Dear all, I hope this finds you well! It’s been an odd month / quarter for us… not much has been working, despite generally supportive data and earnings releases for our portfolio. I am not seeing anything fundamentally broken, so I won't do anything at this stage. We’ve had great returns since we bottomed in October 2022 and it was time for a bit of a pullback! 𝟭. 𝗠𝗮𝗰𝗿𝗼 June saw another sharp drop in inflation (only 0.08%), while economic activity remained overall robust – albeit softening. Given the continued drop in the price of materials, imports, and the moderation in the labour market, I am expecting inflation to surprise to the downside for the next few months. However, although economic activity remain robust, there were a few negative developments at the margin, which likely explain the underwhelming performance of the market (ex AI). ❌ Housing activity is at multi-decade lows and given its importance for the economy, it is something we need to watch out for. Construction and associated sectors are feeling the pinch – materials, pool equipment, furniture, etc. ❌ Less affluent customers are moderating their spending (see recent earnings from WMT, NKE, LEVI). While those customers have a limited impact on the economy, this is also something worth monitoring. An extension of the weakness to the middle class would be a clear red flag. ❌ Large economies are showing signs that the bounce at the beginning of the year is already fading (China, Japan), or are mired in eco-political quagmire (France, UK, Germany, USA). Politics are an important risk factor in this year of many elections. 𝑊ℎ𝑒𝑟𝑒 𝑑𝑜𝑒𝑠 𝑡ℎ𝑎𝑡 𝑙𝑒𝑎𝑣𝑒 𝑢𝑠? While the economy remains solid and continued disinflation places us in a goldilocks environment, we are experiencing a softening – of the labour market, consumer spending and investment. This is not necessarily a bad thing in itself, as long as it does not accelerate and becomes nefarious. Key will be the role of the Fed, as cutting rates too late risks hitting sentiment and investment, as well as the evolution of the political environment in this election year. 𝟮. 𝗣𝗼𝗿𝘁𝗳𝗼𝗹𝗶𝗼 𝗗𝗲𝘃𝗲𝗹𝗼𝗽𝗺𝗲𝗻𝘁𝘀 $CNXC (Concentrix Corporation) reported very positive earnings earlier this week. Growth accelerated for the first time since 2022 – 3.5% in Q4’23, 2.8% in Q1’24 and now 4.0% in Q2’24. While the investments required to onboard new customers, develop AI tools and integrate the Webhelp acquisition are hitting the bottom line, the benefits of those investments are now manifest. It is becoming clearer that CNXC will be a beneficiary of AI investment rather than a victim - as we expected. I still see fair value at $120-150, and am considering increasing our allocation to the stock. $NFE (New Fortress Energy Inc.) is an odd one. Despite delays, the company’s projects are coming on line one by one this year – first the two gasification terminals in Northern and Southern Brazil, soon the liquefaction terminal in Mexico (expected July), the conversion of Puerto Rico’s power plants from diesel to gas, and hopefully the Nicaragua gasification terminal and power plant by the end of the year. Yet, the stock is being left for dead and has 27% of its float sold short. I reduced our holdings in time, and will keep monitoring things. If the company can execute, then the stock will be worth multiples of today’s price. $APPS (Digital Turbine Inc) has been another painful one. They botched their acquisitions, over levered their balance sheet, lost a major customer and suffered the decline in the smartphone market post covid. Everything that could go wrong did. However, the last two quarters offered a glimmer of hope. In Q1, the CEO seemed to finally accept the scale of the problem and made the correct adjustments. Q2 offered hope that their markets were starting to stabilise, and that the performance of the business was improving. APPS should return to growth this year, and some of the headwinds could finally turn into tailwinds. Against that backdrop, the company is valued at a very low multiple of 4x earnings, which leaves a lot of room for improvement. I decided to add a little bit to our investment with a stop loss at the recent low. 𝗖𝗼𝗻𝘁𝗶𝗻𝘂𝗲𝘀 𝗶𝗻 𝗖𝗼𝗺𝗺𝗲𝗻𝘁𝘀! $SPX500 $NSDQ100

5 Mentioned

CNXC

Concentrix Corporation

NFE

New Fortress Energy Inc.

APPS

Digital Turbine Inc

SPX500

NSDQ100