There’s a New Sheriff in Town Armed with a Taser
⚡️The Electrification of Everything ⚡️
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The recycling bin was invented in the 1970s
By the 1990s, 76% of Americans called themselves “environmentalists”
This year, Fortune 500 CEOs are setting records on quarterly calls talking ESG
Today, Tesla’s market cap is bigger than the COMBINED value of: GM, Ford, Chrysler, Honda, Hyundai, Daimler, Ferrari, BMW & Volkswagen
Making Elon Musk the world’s 2nd richest person…
This week EV stocks were on such a tear that Jim Cramer took to Twitter BEGGING investors to take profits
There’s a lot of noise but it all seems to be saying the same thing:
The green trade is ON. Big money is flowing into ESG Stocks!
I am talking:
BUT don’t think you’re covered because you own an ESG ETF (more on this later).
First, who’s the new Sheriff and how big is his Taser?
Biden: Gun’s A Blazin’
The last 4 years have felt more like 40, in terms of taking a step back from saving the planet. I am NOT going to get political here. Staying in my finance lane. But, the Trump administration has been in denial of global warming.
Thank the lord, there’s a new Sheriff in town! He’s not on the throne yet but he’s pulled out a big green taser and he’s not afraid to use it.
This week Biden appointed John Kerry as Special Envoy on Climate Change and vowed to rejoin the Paris Agreement.
This, paired with the announcement of Tesla being included in the S&P 500, caused green stocks to light-up like Christmas with the Griswolds!
But, it’s not just Tesla making gravity-defying moves. There are NOW dozens of billion-dollar ESG companies appreciating +20% a day!
Institutional appetite is also getting nutty. This week, I heard of a financing that was 7x oversubscribed, $145MM demand on a $20MM deal. The company was a penny stock less than 3 months ago!
When I see ‘toppy’ charts or FOMO deals I think to myself, “What idiot is buying at these levels?” But, then I read a post like this and it makes me think twice..
Especially if the biggest bull in town is getting HUNGRIER by the second!
China our Green-Tech BFF.
When China wants to eat, it doesn’t ‘diddle-daddle’ around asking every bureaucrat what they want for lunch.
They push a button and FEAST!
Which is why, it should be music to our ears they’ve decided to be carbon neutral by 2060. Yes, you heard right, the world’s biggest energy user and polluter is turning to an all-green diet. China is getting off heavy hydrocarbons (coal and oil) and switching to natural gas, wind & solar. The transition has begun. They are already a leader in:
NATURAL GAS: 6th largest producer. Second largest LNG importer.
WIND: World leader in wind power generation, with the largest installed capacity of any nation.
SOLAR: Has more capacity than any other country in the world.
ELECTRIC VEHICLES: Largest manufacturer and buyer in the world.
To keep growing this infrastructure, China will need to gobble ALL the metals it can get its paws on: Lithium, Aluminum, Nickel, Graphite, Cobalt, Molybdenum BUT particularly Copper!
Side note, in 2010 when Copper ran from $3 to $4, I was investing in tons of private placements and making great money. Enthused by this boom (and sad over a recent breakup) I bought a 3lbs Chihuahua and thought it was fitting to name him Copper!
I would come to learn that Chihuahuas are one of the least intelligent dog breeds. Little Copper was hard to train. But it turns out, Copper the metal, is pretty damn smart!
PhD in Economics.
You don’t need a degree or a decade on Wall Street to know when the economy is about to ROAR. All you need to do is look at the Copper price.
Right now, in a classic bull market setup, demand is high. Supply is low. And the price has climbed to a 6-year high.
China already accounts for more +50% of the world’s consumption up from 12% in 2000. And growing fast!
And, if we all move to EV cars tomorrow, the demand will be astronomical. But, the irony is, all that copper production could theoretically offset the environmental benefits. Sigh.
What’s the solution, then? According to people much smarter than me, a distinction needs to be drawn between CLEAN copper and DIRTY copper.
“All commodities are not created equal”
How can we make copper smarter? By knowing exactly the REAL cost of its production. Direct & indirect.
For example, if I ask you:
“What’s the difference between buying an electric car built with copper from the Congo versus Chile?”
Could you tell me?
Not today. But tomorrow you will be able to.
See, not all copper is the same. There’s a BIG environmental difference between bulk low-grade copper mined using coal and low-tonnage high-grade copper mined using hydro-electricity. The latter is greener.
Although, all copper may trade at the same price today. In the future, there will be many types of copper depending on how much global warning each produces.
The entire supply chain will be transparent and priced accordingly. From the commodity to the consumer. A company like Tesla will be able to claim it has the cleanest electric vehicle on the market. Made with the cleanest power and cleanest copper.
This is being called ‘smarter markets.’ And it will see a vast reallocation of capital.
It’s starting…albeit in a very simplistic way.
The $7 Trillion Dollar Man.
When the world’s largest asset managers tell you they are dumping stocks, you listen.
That’s what happened earlier this year. Blackrock who manages $7T wrote an open letter to CEOs saying the firm will exit investments that ‘present a high sustainability-related risk’ such as coal producers. Last year they withheld votes from 4,800 directors at 2,700 companies.
Over in Norway, they are doing the same. The world’s largest sovereign wealth fund, who ironically made most of its money from petroleum, has been dumping oil sands stocks.
In Canada, in a rare joint call this week, pension funds managing +$1.6T, warned companies to report ESG data in a standardized way or risk losing investment capital.
Money is clearly skating away from environmental sinners and looking for saviours. What should we be buying?
There are many ways to play it. But first, how NOT to play it.
Beware of fancy ETFs.
A word of caution. You may think you have your ‘green investing’ covered by owning an ETF. Sadly not. The largest position in most ETFs is a tech company called Microsoft. ESG ETFs hold +$2B worth of it. I asked one of my smarter investor friends whether there is any legitimacy to this. He said “last time I checked all Microsoft does is write fancy ESG reports” (eye roll)
How’s Grit Playing It?
I accidentally made a multi-bagger. Well, not quite, I haven’t sold. In fact, I have been buying more. Over 2.5 years ago, I invested in my friend Josh Crumb’s company. I’ve known Josh for +13 years. When I invested, there was no business. I was betting on the jockey not the horse. Josh is a former Goldman Sachs Metals Strategist who’s founded and help build two other public companies. One of which I did very well on.
His new company is called Abaxx Technologies. It’s about to go public, currently trading under NML-T. Their mission is to become ‘THE’ Commodities Futures Exchange for the new green world. They have a fully-compliant exchange in Singapore ready to transact and a platform they believe will reshape how trading is done. They will start with LNG contracts and then move to other commodities. If successful, they will be the ‘middle-men’ taking a fee on every transaction. Warning! This company has ZERO revenue and is speculative. Valuation is +US$150MM with CAD$14MM cash. Investors include the Lundin Family, Kyle Bass (U.S Hedge Fund), John Burbank ($4B U.S Fund, famous for having predicted the subprime crisis) and Robert Friedland. Robert is not everyone’s cup of tea but he does own the world’s 2nd largest copper project and is one hell of a visionary. Listen here if you want to learn more about why he invested. Josh has personally invested +$2MM and a total of +$16MM has been invested in the company to date. Together, insiders and management own ~45%.
Other less volatile ways I am playing the green theme…
Boring Yield Stocks: I own positions in these renewable stocks which pay me +2-4%. They haven’t had big ridiculous moves so might be worth a look. Algonquin Power (AQN-T, $12B) & NextEra Energy (NEE-US, $150B) NEE-US is particularly interesting as it’s a large U.S. utility leading conversion to non-fossil fuel sources of electricity.
Another Small Cap I own:
Xebec (XBC-V, $600M). They turn animal manure & sewage into power. Customers include farmers, utilities, municipalities and waste management companies. Remember the U.S ethanol boom? Caused by governments mandating that gas at the pump have some % of ethanol. A similar thing is happening now with renewable natural gas which XBC makes. Revenue positive. More institutional eyeballs to come when they hit $1B market cap.
I have also been picking away at some copper stocks HBM-T & FM-T.
Although there’s no chance Copper the Chihuahua will miraculously get smarter, I do believe capital allocation will get smarter & greener and I want to be on that trade!
Don’t forget to follow me on Twitter. Where I give daily insights on stocks.
Until next time. Always Yours. Incessantly Chasing ROI,
-Genevieve Roch-Decter, CFA
P.S Bitcoin took a 13% plunge mid-week. If you sold. I don’t know how you even hold a pen with such weak hands 🙃
What else we Grittin’ On:
Robinhooders. Outperforming hedge funds 20-to-1. Retail favourite stocks are up 80% YTD. This market rewards the bold who eat triple leverage $TESLA calls for breakfast!
‘H to the izz-O’. Jay-Z Inks Largest Cannabis SPAC Deal Ever. Feels a little SPAC x Cannabis ‘toppy’. But I love JayZ, so not going to hate.
Gig Workers. Could be paid in stock under new SEC proposal. Imagine being an $UBER driver 10 years ago and getting paid in stock!
$7 Trillion Dollar Problem. The U.S government has $7.4T in debt due in next 12 months. 3 options. But really only 1 option ; )
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