01 10/21 01/10/2021

Weekly Newsletter Week 39

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WEEK 39 | OCTOBER
WEEKLY NEWSLETTER

 

OVERVIEW

  • Financial Markets & EconomiesA Strengthening Economy
  • Good to knowBenefitting from the Infrastructure Spending
  • Your portfolio highlights Solar Resources Fund, Gold Royalty Corp
  • In other news: Markel and Markel CATCo Announce Buy-Out Transaction Offering Accelerated Return of Capital to Investors 
Financial Markets & Economies

Oil prices hit 3-year highs several times this week because of the global output disruptions. The disruption has forced many energy giants to pull large amount of crude oil out of their inventories. Technology stocks on the other hand continued their decline this week which is attributed to the rising interest rates. It was observed that option trading surpassed stock market trading for the first time in history. This indicates a high level of speculation in the financial markets which can affect prices in both up and down swings. Technology stocks, which tend to have the highest speculation, were among the worst performers this week.

Jerome Powell, Chair of the Federal Reserve of the U.S., said this week that the U.S. economic growth continues to strengthen despite facing upward pressure caused by supply chain disruptions, tight labor supply, and other factors related to the re-opening of the economy. The upward price pressures are expected to remain in the coming months, but inflation will eventually fade and it head back to the Fed’s 2% target said Powell. This is good news for investors.

 
Good to Know

We constantly hear about the U.S. Infrastructure bill in the news. In short, the U.S. has an aged infrastructure system. According to many economists investing in new infrastructure in addition to maintaining the current one would stimulate the economy by increasing efficiency and reliability which will boost U.S. competitiveness, create jobs, and insulate the economy from shocks. According to a research conducted by the University of Maryland, infrastructure investments add as much as $3 to the Gross Domestic Product (GDP) for every $1 spent. These effects are even greater during a recession. Two of the companies that are core holdings in our portfolios are set to benefit from this infrastructure spending. These are Berkshire Hathaway (BRK.B) and Brookfield Asset Management (BAM).

Berkshire Hathaway has good exposure to infrastructure through subsidiaries such as Acme Brick, International Metalworking, Marmon Holdings, Burlington Northern Santa Fe, and Extra Corporation. These are either infrastructure companies or infrastructure distributors which will also benefit from increased spending on infrastructure. Berkshire Hathaway Energy is also a subsidiary likely to benefit from the spending since renewable energy is considered a sub-set of infrastructure. Berkshire Hathaway Energy is one of the largest wind producers in the U.S. In addition to its subsidiaries, Berkshire may also benefit from its portfolio holdings. The company holds a lot of financial institutions in its portfolio which are likely to finance the spending plan according to analysts.


Brookfield Asset Management is also positioned to benefit from the infrastructure spending because of its exposure to the industry. Think about subsidiaries like Brookfield Infrastructure Partners and Brookfield Renewable Partners. Brookfield Renewable Partners as the name implies is one of the largest renewable energy producers in the world. Brookfield Infrastructure Partners acquires, develop, operates, and generally improve all kinds of infrastructure assets such as roads, transportation, ports, toll roads, clean water, wastewater, gas utilities, energy infrastructures, and power and gas transmissions. The holding company is optimistic about its future and laid-out a plan in their recent Investor Day to double in size over the next 5 years. That is more than 20% annualized return.

 
Your Portfolio Highlights
 
The Solar Resources Fund (SRF) seeks substantial capital appreciation by investing primarily in a diversified portfolio of about forty international publicly traded equity securities. The fund may also invest in equity funds, but not more than 10% of its net assets in the securities of a single fund. The fund concentrates its research and capital on undervalued resource companies, such as precious metals, base metals, and the energy sector (oil, gas and renewables). Some of these investments carry a greater risk, but this allows for extraordinary return potential in the future. The SRF returned +2.76% year-to-date. In the highlight this week is Gold Royalty Corp which returned +20% in September alone.

Gold Royalty Corp (GROY) is a precious metals-focused royalty and streaming company offering creative financing solutions to the metals and mining industry. The Company acquires royalties, streams, and similar interests at varying stages of the mine life cycle to ensure a balanced portfolio offering near, medium and longer-term attractive returns for investors. Their diversified portfolio consists of over 100 royalties located in mining friendly jurisdictions throughout the Americas. This provides investors with lower risk exposure to gold with free exploration upside on the underlying projects.

Gold Royalty Corp adds value with its:

  • ability to provide low cost of capital compared to traditional debt or equity financing;
     
  • ability to provide tailor made solutions to meet specific financing goals and objectives;
     
  • presence in capital markets, which provides counterparties with expanded validation and visibility;
     
  • endorsement of projects’ technical merits and potential.


The Gold Royalty management team, board of directors and advisory board have more than 300 years of combined mining sector experience, including exploration, development, operating and capital markets experience. The intention is to capitalize on the team’s collective knowledge, experience, and network in order to add value to the owners and operators of existing and prospective mines they partner with. The team has enough experience and capability to provide creative solutions to prospective partners and thereby enhancing the company’s ability to acquire attractive growth assets.             


*Please visit the Gold Royalty Corp website for more information or click one of the images below for their latest presentation.

Gold Royalty Corp - 6 month stock performance
In Other News
 
We wish you a pleasant weekend and hope you stay safe.

Kind regards, 
Shernel Thielman 
Investment Manager 

www.lunarasset.com | shernel@lunarasset.com 
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