Livermore Partners commentary for the month ended October 2021, discussing their shorts positions in ARK Innovation ETF (NYMARKET:ARKK), Meta Platforms Inc (NASDAQ:FB) and Tesla Inc (NASDAQ:TSLA), and their new position in Victoria Gold Corp (TSE:VGCX).
In August, Mohnish Pabrai took part in Brown University's Value Investing Speaker Series, answering a series of questions from students. Q3 2021 hedge fund letters, conferences and more One of the topics he covered was the issue of finding cheap equities, a process the value investor has plenty of experience with. Cheap Stocks In the Read More
To Partners and friends:
October turned out to be a solid month with Livermore's YTD return now up to 21.76%. Brent crude gained further though our energy holdings (Jadestone Energy PLC, Vista Oil and Gas, and Energean PLC) did not. Still, we had positive performance as gold stocks rose and short positions we hold as market hedges, fell to earth. Our overall short exposure continues to fluctuate(7% of the current portfolio today) given we are not a long/short fund but Event-driven and opportunistic in nature.
Short Positions In ARKK And Meta
Today, we have tactical shorts positions in shares of ARK Innovation (ARKK) and Meta (previously called Facebook). They worked well for Livermore as high-flying stocks begun their descent, even with indexes rallying to new highs and earnings coming in strong.. Additionally, we hold a small short position in EV-automaker Tesla which could be of assistance tomorrow on news of Elon Musk personally selling shares. This could spell a real top.
Build Back Better
Overall markets continue to be saturated by high velocity increases in the M2 money supply caused by the massive Government money printing experiment. With the Biden administration adding an additional $1.5T+ given this weekend's announced infrastructure deal. The cash used to "build back better" will no doubt increase the nosebleed 30-year high inflation rate with gasoline now $4 a gallon here in Chicago. The political need to drive green projects (that of course require fossil fuels as inputs) will further add to the conundrum the Federal Reserve will face as the economy pushes forward. Last week, the FED begun to pull back on its $120B injection of bond buying even with personal income ticking lower and inflation continuing to run steaming hot. How all this plays out is anyone's guess and our fund is positioned well for further monetary debasement fanning the flames of inflation.
New Position: Victoria Gold
On the debasement and precious metal's theme, Livermore has a new position in gold miner, Victoria Gold. It's an activist position in which we feel the intrinsic value of this single asset play is much greater than today's share price. Victoria is a 200k ounce producer in the Canadian Yukon that is successfully ramping up production and cash flows of its Eagle Mine. Great to see in todays $1800 gold price but our concern is their questionable operational history and heavy reliance with owning just the Eagle Mine in the portfolio. It would be in the best interests of shareholders to monetize the asset for a solid premium and increase consolidation amongst the sector. Recently, Coeur Mining (another Livermore holding) acquired a 17% percent stake in VGCX which helped validate our thesis of a strong tie-up. Livermore's note below to CEO John McConnell reflects our constructive willingness to see management and the Board of Victoria do the right thing and sell the asset while production strengthens and free cash flow reigns.
Will update further as events unfold.
Livermore's Note To Victoria Gold CEO John McConnell
From: David Neuhauser
Sent: Monday, September 13, 2021 2:49 PM
To: John McConnell
Subject: Victoria Gold
It was good speaking with you a couple of weeks ago and today's update was very welcome. Good luck in Denver.
As you know, we are an investor in Victoria and appreciate you taking the time to speak with us. Since our discussion, Livermore has watched with concern as Victoria’s stock price has fallen while its peers have retained greater value. This brings me back to the subject of our discussion. In Livermore’s assessment, Victoria lacks the scale and diversification needed to maximize the value associated with its very promising asset. Despite strong gold pricing, the market continues to undervalue Victoria and we believe that will be the case until Victoria combines with another precious metals producer and achieves the scale needed to compete globally while diversifying itself away from the structural risk associated with exposure to a single producing project. While Victoria has both a high quality asset and a high quality management team, it lacks the scale and diversification needed to thrive in the increasingly globalized and consolidated metals sector. We simply do not see Victoria unlocking full value for shareholders within the context of its current platform and would once again reiterate our calls for Victoria to seriously consider potential M&A prospects. Shareholders should not be subjected to the further inevitable stock price depreciation in the event that Victoria encounters issues ramping up activities at Victoria’s Eagle mine or through further exploration.
At Livermore our preference is always for constructive engagement and I remain available to discuss these matters with you at your convenience.