Mea culpa: I do know tweeting an distinctive (however solely undocumented!) annual return determine on Jan-1st is now de rigueur for FinTwit, however I’ll follow my typical strategy, so apologies once more for being a bit late with my 2024 annual evaluation. However hey, hopefully a few of you had been nonetheless anticipating it…and this removed from the madding crowd, it now proves a extra leisurely (& helpful) learn! And whereas we’re at it, I ought to after all apologise for nonetheless being on WordPress, not Substack. For nonetheless plugging away doing this 13+ years later. For nonetheless having no paywall/€XXX annual subscription (I imply, what’s his bloody sport?!). For nonetheless disclosing precise portfolio modifications, basically on a real-time foundation, and offering a totally documented/auditable efficiency monitor report & place sizes – yup, NO look-back buys/sells, after-hours trades, and/or undisclosed hedges right here! – one of many only a few, if not the one (free) funding weblog left on the planet (nonetheless) doing this. Whoops…and for nonetheless calling it an funding weblog, for God’s sake!? And most of all, for nonetheless having no blue checkmark on X…
I do know, perhaps I must be excited about altering all that…in spite of everything, it’s human nature for individuals to worth what they really pay for, versus what they get totally free, whatever the precise high quality, amount, and/or worth concerned. And always being demoted by the X algorithm (duhhh, no checkmark & helpful third-party hyperlinks in most of my tweets!) isn’t any enjoyable both. However, I don’t want the cash, and I don’t fancy a brand new ‘boss’. And name me old school, or simply plain outdated troublesome, however I really like having real skin-in-the-game with a inventory, its administration & fellow traders – it’s the last word alignment with readers & followers who truly analysis & purchase the identical shares I personal – and the unavoidable actuality with any paywall/subscription is that you simply rapidly exhaust your main portfolio holdings & find yourself recommending shares during which you’re barely invested, or don’t even personal in any respect! I suppose embracing that path (& its rewards) is the secret, and arguably it’s completely wonderful if your prospects obtain honest warning…however for me, the ‘compensation’ I worth from the weblog is realizing fellow traders have (ideally) multi-bagged with me, and at worst really feel the identical ache & hopefully lose much less cash than I do on some (inevitable) losers.
[To be fair: In my first (Wexboy) decade, my win ratio was actually 70%, which I concluded was (perversely) too high…ie I needed to re-train my attitude to risk & force myself to start adding more smaller/riskier holdings, which would presumably decrease my win ratio, but also (I suspect) increase my long-term returns overall.]
However time to crack on right here – my FY-2024 Benchmark Return continues to be a easy common of the 4 primary indices that finest signify my portfolio, and it produced a benchmark +11.6% achieve:
These returns are so predictable now, it’s change into extra & extra absurd at this level…the S&P 500 wildly outperformed its long-term common returns once more (& delivered the standard 3/4x return of the FTSE 100 & STOXX Euro 600), and regardless of the particular underlying causes*, mathematically this clearly can’t proceed indefinitely. [*Duhhh, it’s the Magnificent 7…which saw the Nasdaq close up +28.6% last year]. Whereas the ISEQ carried out someplace in between these two extremes, a return to kind after an unexpectedly S&P-like efficiency in 2023. Traders clearly stay usually suspicious of smaller corporations, with the FTSE 250 up +4.7%, whereas the Russell 2000 closed up +10.0% (respectable, however a fraction of the S&P/Nasdaq). [It was another down year for the AIM All-Share, at (5.7)%, making the consistently positive returns of so many AIM/small-cap portfolios on UK FinTwit even more tiresome]. Elsewhere, returns weren’t a lot totally different for the MSCI Rising Markets USD Index (up +5.1%) & the MSCI Frontier Markets USD Index (up +9.5%), however crypto once more delivered spectacular returns with Bitcoin up +121% & Ethereum up +46%.
This yr I’ll resist the urge to opine extra in regards to the markets: We’re solely initially of one other Trump presidency, US nationwide debt’s beginning to spiral uncontrolled (even when DOGE succeeds, received’t the ‘financial savings’ be spent on tax cuts anyway?), we’re prone to see a wave of anti-incumbent/elite populist actions & governments for years to come back within the West (each left & proper), I think we’re in all probability nowhere near completed with an distinctive AI-driven bubble market (which drags expertise & crypto larger too)…and in spite of everything, no one actually is aware of something!? So it’s each man for himself – there’s loads of threat on the market, but in addition loads of alternative to come back – your portfolio & investing type will more and more rely on what you even have the abdomen to consider in & what you will have the endurance to sleep comfortably with every night time.
So let’s rip the bandage off right here – right here’s my precise Wexboy FY-2024 Portfolio Efficiency, by way of particular person winners & losers:
[Gains are based on average stake size (NB: NO actual changes in holdings, except for an imperceptible increase in TFG due to its DRIP) & end-2024 vs. end-2023 share prices. All dividends & FX gains/losses are excluded.]
And ranked by measurement of particular person portfolio holdings:
And once more, merging the 2 collectively – by way of particular person portfolio return:
I’m clearly none too happy with a (9.6)% loss for the yr…it’s not disastrous in absolute phrases, but it surely’s clearly an enormous under-performance relative to my precise benchmark. To not point out, a fraction of the returns generated by each random FinTwit über-portfolio on the market (after all)!
KR1 is clearly guilty right here (& Document doesn’t assist). If I’d restricted myself to the sub-3%/5% KR1 holding I persistently suggest to different traders, my total return would have been fairly optimistic, and if it was absent from my portfolio I’d have broadly matched my benchmark return final yr. However I didn’t, and it wasn’t – which gives some delectable schadenfreude to the standard suspects – you’re welcome!
However this additionally illustrates why the whingers & haters achieve this badly in the long run…they only don’t have the imaginative and prescient, or the abdomen, or the endurance, or the attitude, to truly discover them (early) & then truly hold on to the real/long-term compounders. And naturally they received’t keep in mind (or received’t admit) that within the prior yr, KR1’s NAV/share was truly up +178%, the share worth itself was up +268%, it was a significant driver of an total +65.4% achieve in my portfolio, and it’s an uncomfortably giant place at this time just because it’s turned out to be such an enormous multi-bagger for me during the last 7+ years! Clearly, this can be a high-quality drawback to have…
However longer-term readers & followers already see/know this – I’ve written lots of of hundreds of phrases through the years on this weblog about investing & particular investments, and lately it actually simply boils all the way down to: i) winners hold profitable – the problem isn’t discovering them, it’s truly holding on to the top quality compounders by means of thick & skinny to compound your wealth, and ii) diversifying your portfolio as a lot as attainable – and I see NO actual proof of that in 95% of the portfolios I encounter on X & the web – to additionally assist shield your wealth. And satirically I realise that the much less I write now on the weblog, the much less I chop & change positions, the much less I add new write-ups, the higher I illustrate & drive residence that ‘maintain & diversify’ lesson. And once more, by way of outcomes, the +26.0% pa returns from my first decade right here (once more, totally documented alongside the best way!) are a fantastic endorsement…and whereas my 15 yr returns clearly stay a work-in-progress, I’m very pleased with my long-term (non-public) returns, which after all are a key motive the weblog truly exists & my former/now forgotten profession not does! So, yeah:
Maintain…and diversify!
And with that, let’s do an annual evaluation of my present (disclosed) holdings:
i) Donegal Funding Group ($DQ7A.IR)
FY-2024 +0.6% Acquire. Yr-Finish 0.7% Portfolio Holding.
[NB: Year-end holding reflects (0.1)% impact of the latest return of capital (approved in Nov-24 & settled end Jan-25).]
Deal, or no deal?! Properly, nonetheless no (remaining) deal…however at the very least Donegal Funding Group introduced one other return of capital earlier than year-end. This displays a continued build-up of web money to €9.7 million (inc. a bond funding maturity), as of November – sadly, solely half the money was truly utilised, ie €4.8M to redeem 18.15% of all shareholdings at €16.50/share (100% for holdings of fifty shares or much less), which given the info appears far too conservative right here. Nevertheless it’s now retired one other 19.1% of Donegal’s o/s shares, lowering the web share depend to 1.23M shares.
We additionally noticed a welcome +11% improve in seed potato gross sales (to €33 million) for FY-2024, albeit income does oscillate relying on annual yields/pricing. Underlying working margin was unchanged at 5.0%+, however the division can ship 7-10% margins in its finest years, plus it totally absorbs Donegal’s central (board/itemizing/and so on.) prices, so I nonetheless see a 1.0 to 2.0 P/S deal a number of vary as honest, specifically accounting for its mental property portfolio, its (totally expensed) R&D spending/pipeline & further value/income synergies within the palms of a bigger acquirer. [The Nomadic Dairy sale achieved a 1.8 P/S multiple, for comparable reasons]. Minority traders also needs to be reassured by the administrators’ 6.5% stake & Pageant Investments/Nick Furlong’s 12.7% stake in Donegal, which ought to finally incentivise & ship a compelling deal.
Submit-capital return, Donegal holds €4.9 million in web money, €0.6M in funding property & a €0.7M/20% funding in Uktal Seeds (India), versus a €20.3M market cap (at €16.50/share), so traders are at the moment valuing the seed potato enterprise on a 0.4 P/S a number of!? Which leaves loads of low-risk/event-driven upside on supply right here…alas, it’s 3+ years now for the reason that Nomadic sale & we nonetheless haven’t any public affirmation of a remaining seed potato sale course of (or of Donegal itself), however in the meantime the corporate pays its manner with a 1.8M pa web revenue, so my primary frustration right here is definitely the near-zero buying and selling quantity & my lack of ability to re-up my place.
FY-2024 (5.3)% Loss. Yr-Finish 0.8% Portfolio Holding.
One other (small) holding simply marking time right here…although a +7.4% yield made for an total achieve final yr. [Yield’s higher again today at +8.0%, per the higher/proposed dividend]. The corporate did appoint a brand new CFO (internally), however in any other case it’s principally enterprise as typical. Annual pelt volumes normalised again to 10.5 million in FY-2024, however a +20% improve in costs delivered a mere (3)% decline in whole brokerage gross sales to €343M. Sadly, a decrease take fee & unexpectedly low financing revenue meant earnings per share practically halved to €0.73/share. Nonetheless, that is attributable to a poor H1, with pelt volumes down sharply by (35)% in the important thing March public sale, so H2 eps of €0.68/share appears much more indicative of Saga’s present run-rate, and is supported by a restructuring which eradicated expense within the defunct Dutch & Danish markets, plus some further native personnel/rental expense. [Justified as a response to lower volumes, but could/should be a nice tailwind as scheduled FY-25 volumes (at 10.0M) are in line with the medium-term average of 10M+ pelts, and financing income ideally picks up again]. Administration definitely appears to be indicating this with a 97% payout ratio (ie a proposed €0.71/share dividend).
That H2 annualised run-rate is €1.36/share, not far off the typical €1.51 eps we noticed within the final 4 years (vs. a ten.7 million pelt common), which pegs Saga Furs on a 6.5 P/E, vs. a €8.90 market worth at this time. Alas, there’s little signal traders will award the next a number of, within the absence of any form of sustained progress trajectory. That being mentioned, you accumulate a +8% yield, and worth traders on X & the message boards are inclined to rediscover Saga each two/three years & bid it as much as €12.00+ & even €17.00+ worth ranges, at the very least quickly. And there’s nonetheless the potential for Chinese language acquirer (alas, a Russian bidder’s off the desk), however who is aware of the timing/IRR of such an consequence. Sarcastically, one of the best consequence right here can be an precise (phased) shutdown of the fur business in Finland/Europe…in that state of affairs, I’m fairly assured a Saga Furs wind-down would ship its present €25+ NAV per share, so how about one final ESG win?!
iii) Tetragon Monetary Group ($TFG.AS)
FY-2024 +42% Acquire. Yr-Finish 3.5% Portfolio Holding.
[NB: Year-end holding reflects a new (pre-yearend) 1.0% increase in my position, as I confirmed Jan-1st on X.]
2024 was (lastly) an actual inflection/breakout yr for Tetragon Monetary Group, with traders having fun with a +42% share worth achieve (& a +4.5% yield). This displays a +15.4% NAV/share whole return – its finest in years, once more reinforcing its longer-term report of low-volatility 9-10%+ pa web returns – and a narrowing of Tetragon’s NAV low cost from 68% to a nonetheless astonishing 60%. [Worth highlighting: Even with zero NAV gains/dividends, that relatively small discount compression would have still delivered a +25% shareholder gain!] Crucially, it additionally helps silence the haters – who had been at all times pleased to trot out their typical misconceptions, lies & historical historical past right here – additional bettering sentiment, with the top off an extra +10% YTD & hitting new all-time-highs). And I’d anticipate additional features forward, based mostly on anticipated developments this yr with some key investments…to not point out a recent wave of shopping for IF the shares finally commerce $19/$20+ a share (per my typical rule – most punters solely get after a share doubles!).
There have been three primary NAV drivers final yr: The primary was Hawke’s Level, which funds top quality mining tasks within the Australian (& North American) useful resource sector – its worth grew virtually +70%/+$80 million final yr, net-net, albeit masking important (draw back) volatility alongside the best way from a peak $320M worth as of end-October. [One can hardly complain about the overall net gain!] The second is Ripple Labs A&B Most well-liked Inventory, which gained an astonishing 130%+/$135M+, within the final two months of the yr, reflecting its SEC win earlier within the yr, the election of Trump & a brand new crypto-friendly administration in November, and a subsequent 4/seven-fold achieve in $XRP’s market worth. Third, we noticed a +25%/+$185M achieve in Tetragon’s 75%+ stake in Equitix, acquired the welcome information in October of an precise sale course of (nonetheless ongoing at this time), and affirmation TFG’s stake had elevated to 81.5% however would now accrue a tail/earnings legal responsibility to former Equitix administration (for the second, I’m assuming it nonetheless nets again out to an efficient 75% stake). All instructed, much less dividends & a measly $25M tender supply – that’s lower than 1% of NAV & barely 40%+ of the tender gives in 2023 – these features in worth web out to a near-$350M NAV improve final yr.
This yr, hopefully we see an precise sale of Equitix – a £1.5 billion price ticket has been floated, vs. $14B+ of AUM, reflecting different latest offers & a voracious urge for food for various/infrastructure asset managers. That worth could also be a bit wealthy, however I’d anticipate an precise deal to nonetheless supply important upside for Tetragon’s 75%+ stake, vs. a year-end $922 million worth. [Which would again confirm the (prudent) valuations assigned to TFG Asset Management, which is currently valued at $1.6B vs. $41.2B in AUM (up 50% from $27.4B at end-2019)]. And such a deal may clearly equate to 80%+ of Tetragon’s present market cap – and web debt’s nonetheless beneath 10% of gross property, so there’s no urgent must repay any of it – in order that’s the place the rubber actually meets the street:
Both Griffith & Expensive flex their management muscle groups, try to reinvest the money & personally accumulate the charges on the administration contract for an additional 5/10 years, OR they really give attention to enhancing/realising shareholder worth through a massively accretive tender supply for an enormous % of Tetragon’s o/s shares. The previous was traders’ default assumption so far (& rightly so), however because the principals age out (& need to doubtlessly revalue/realise their very own stake), and TFG’s different administration/staff foyer re their steadily rising stake, and noting the sheer scale of this potential deal, the chances shift in favour of the latter…clearly it’s nonetheless a wholly event-driven state of affairs, however IF we see a sale & IF we see an enormous tender supply, then we’ll additionally see a step-change in sentiment & the NAV low cost. Additional, let’s hope we will additionally add some crypto pixie-dust to the equation – again of the envelope, Tetragon now owns someplace between 2.25%-2.5% of Ripple Labs, whose non-public market (fairness) worth is at the moment value one thing like $14/$15.5 billion at this time, vs. its precise treasury of 43.3B+ $XRP, which is at the moment value one thing like $107B! That’s a hell of a worth hole, one that would doubtlessly be closed/realised through what I’d name an anti-$MSTR technique, ie (step by step) promoting $XRP crypto & shopping for Ripple fairness.
And Ripple Labs has already began down this street – executing two/three tender gives within the final yr, funded from $XRP gross sales – a method that would entice much more consideration & be additional refined IF Ripple & Brad Garlinghouse truly suggest an IPO, now that Trump’s within the White Home. So yeah, it’s undoubtedly a good suggestion right here to do the maths & work out the potential/uneven upside for Tetragon on its Ripple Labs stake…vs. its present $1.3B market cap (& a possible/impending sale of Equitix).
iv) VinaCapital Vietnam Alternative Fund ($VOF.L)
FY-2024 +2.6% Acquire. Yr-Finish 4.8% Portfolio Holding.
The VinaCapital Vietnam Alternative Fund efficiency in 2024 – truly an total 5%+ achieve, together with a +2.5% yield – seems very very like 2023, however once more this obscures a a lot more healthy Vietnamese market. The VN Index was truly up one other 12%+, however this was mitigated by the dong depreciation we’ve seen during the last three years & which accelerated to (5.1)% in 2024 – not stunning, given the greenback energy we noticed elsewhere in Asia (& globally). By way of VOF’s London itemizing, a touch weaker sterling helped, however shareholder returns had been additional damage by a widening of the NAV low cost from 18% to 23%+.
This displays: i) the pervasive London valuation low cost, which is usually justified (domestically) however presents an unimaginable alternative to purchase into worldwide publicity/corporations on a budget, and ii) continued investor aversion to any form of frontier/rising markets funding. The latter is especially irritating as Vietnam’s on the FTSE Russell watchlist to be promoted from Frontier to Rising Market standing, which might immediate important inflows (whatever the normal investor apathy). It additionally belies the VOF group’s glorious in-house IR operate, which gives common/detailed communication with shareholders, periodic traders shows & roadshows, a steady share buyback programme, and ensured a seamless portfolio administration transition after the premature loss of life of Andy Ho (VinaCapital’s CIO) final June.
For sure, the quick & long-term outlook are nonetheless as promising as ever. Vietnam is the new China – it has a younger & comparatively well-educated workforce which under-cuts China’s labour prices & also can transfer up the export curve, it’s already a major marketplace for China outsourcing, it has a powerful buying and selling relationship with the US, its GDP progress has accelerated to 7%+ whereas inflation’s regular round 3%, and regardless of some latest political in-fighting & musical chairs it does a much better/extra relaxed job than China of balancing a capitalist economic system vs. one occasion communist management. However, Trump’s tariff bazooka may current a brand new risk, however arguably political/tariff tensions with China will proceed to assist Vietnam as a substitute export market & a de facto China-US entrepôt. As for the market itself, it now trades on a ten.3 ahead P/E, vs. 13-15%+ earnings progress (in 2024 & 2025), with the VNI buying and selling simply shy resistance at 1,290-1,310 (for nearly three years now) & doubtlessly all set for a significant rally & new 1,500+ all-time-highs if this resistance degree can lastly be damaged. Related resistance & ATHs lie forward for VOF, and in the meantime its portfolio mixture of public fairness, PIPE, OTC/pre-IPO shares & actual property investments provides necessary & distinctive diversification versus its peer funds.
FY-2024 (25)% Loss. Yr-Finish 5.1% Portfolio Holding.
[NB: After a YTD (12)% share price decline, I subsequently increased my position by +0.9% from 4.5% (at the time) to a 5.4% holding, as I confirmed Jan-18th on X. #REC’s rallied +17% since.]
Document managed to observe up a (22)% loss in 2023 with a (25)% share worth loss in 2024…this was mitigated by a +7.3% yield, however nonetheless calls for the plain query: How was I so incorrect about certainly one of my largest holdings? Properly, as a substitute, I purchased extra #REC in January! Which looks like a direct violation of my typical mantra to ‘common up, not down!’…in all probability the toughest lesson any investor can hope to study & grasp.
Nevertheless it highlights an necessary nuance right here – the main target is at all times on the enterprise, not the share worth – ie your finest long-term compounders (inevitably) come from averaging up & into the rising KPIs/optimistic enterprise trajectory of a fantastic enterprise (usually mirrored in a rising share worth/valuation), not averaging down on a declining enterprise (even at an ever cheaper worth/valuation). And likewise highlights the disconnect between short-term traders who obsess over the share worth, the most recent outcomes (vs. dealer consensus!?) & are simply suckered into the standard ‘worth drives narrative’ spiral, versus traders who ignore the noise & give attention to the long-term (absolute) progress trajectory of a enterprise. In Document’s case, income’s up 75%+ & earnings per share greater than doubled within the final 3.5 years, whereas AUM’s close to an all-time-high at $100.5 billion…that’s what I’m truly averaging up on right here.
Bother is, in FY-24 & H1-25, Document has been: i) consolidating the aggressive AUM, income & earnings progress of the prior two years, ii) investing in larger wages & extra staff, an IT in-house restructuring/redevelopment, and new merchandise, enterprise strains & AUM (inc. a brand new €1.1 billion+ infrastructure fairness fund launch from its new 41%-owned RAM sub.) to diversify & assist its medium-term progress technique*, and iii) managing the transition to an entire new technology of administration, specifically responding to the long-anticipated retirements of Leslie Hill & Steve Cullen with the appointment (internally) of Jan Witte as CEO & Richard Heading (ex-Group FD of IG Group) as CFO. This left eps flat/down marginally during the last yr & a half, with the share worth spiraling decrease in response, compounded by a savage & relentless bear market in an in any other case unrelated UK-listed asset administration sector (with most share costs hitting new 5/10 yr lows in the previous couple of months).
[*And yes, Witte & Heading clearly need to refine & reiterate this strategy at the next FY results. Exploring the idea of adding more external talent/partnerships like RAM would be very welcome too – recruiting a couple of the City’s top cold callers & deal closers would inject some killer instinct into the culture, and some external partnerships (for example, in Asia) would help tap what is a relatively unlimited potential TAM for Record’s FX business].
However isn’t that how markets work…earnings pause = degrowth = derating?! Yeah however, what’s the proper a number of if Document delivered +23% pa eps progress during the last 3.5 years? A 25+ P/E would possibly work, proper? However that’s what Document truly delivered…besides it was +46% pa eps progress over two years, then (2)% pa over 1.5 years! And therefore, REC trades on a sub-10 P/E at this time (vs. H1 annnualised eps of 5.62p), and traders even query whether or not its present +9.5% yield is sustainable. [Yes, it is…noting 7.4p/share of surplus net cash & how sticky Record’s business actually is!]. Whereas I stay assured, as do former owner-operators Neil Document & Leslie Hill (who nonetheless personal a 36%+ stake, in mixture), of Document’s precise intrinsic worth (and/or potential deal worth!?) & its longer-term progress technique – I totally anticipate the £60 million income & 40% working margin targets that Hill initially set will probably be attained sooner or later, presuming continued AUM progress/diversification, good execution & substantial working leverage, and can ship 10p+ earnings per share accordingly. With REC buying and selling 52p+/share once more, breaking essential 58p assist/resistance degree would sign a return to its latest 62-70p worth vary…in the meantime, traders should buy a top quality recurring enterprise on a 2.0 EV/Income a number of, versus a 31% working margin, a 42% incremental working revenue margin over the previous couple of years & finally a possible 65%+ incremental working margin.
FY-2024 +36% Acquire. Yr-Finish 13.9% Portfolio Holding.
And what a juggernaut Alphabet is…it took 15 years to achieve $100 billion in income, and solely one other 6 years to achieve $300B! In FY-2024, income was up one other +14% to surpass $350B (with YouTube & Cloud now on a $110B run-rate), working revenue was up +31% as working margins continued increasing to 32%, and earnings per share was additionally up +31%. Which mirrors what we’ve seen during the last 5 years, with income greater than doubling & working revenue/eps compounding at 27% pa. Which highlights how (absurdly) low cost the corporate nonetheless is right here, buying and selling on a 20.5 ahead P/E. Which, for a lot the identical causes as I initially detailed, would suggest a P/E within the teenagers for the precise core enterprise…so $GOOGL’s multi-bagged since I first wrote it up in 2017 (‘So Why Not Google It..?’), however continues to be principally simply as low cost at this time!
Yeah however, the haters refrain – what if Alphabet loses the AI Wars? And isn’t Search going to zero anyway…if Bing didn’t kill it off already?! And all the opposite questions they requested 5 years in the past & 5 years therefore, despite the fact that they may by no means truly step up & purchase $GOOGL – why even argue with them, when each set of outcomes are the one rebuttal wanted.
However all that doubt & anxiousness highlights a basic misunderstanding of the dangers & alternatives. Zooming in on Search, it’s essential to grasp its core monetization drivers are literally a quite restricted (however extremely beneficial) sub-set of the whole universe of search queries – ie it’s primarily shoppers researching & truly/doubtlessly shopping for merchandise & providers, and Search stays probably the most environment friendly manner to do this. And that’s why Google now fortunately gives an AI Overview for many queries – it enhances the consumer expertise & doesn’t disrupt the underlying enterprise mannequin, since most queries aren’t essentially monetizable anyway. That being mentioned, we’re on the verge of agentic AI, so Search economics will migrate into that consumer expertise too, and/or change into an precise recurring income subscription mannequin through a private digital assistant.
As for the massive image, it’s value highlighting Google/Alphabet was/is the world’s largest & finest AI firm (go on, strive clarify your life & the world pre-Google Search to your children!?). And Open AI was constructed on Google’s Transformer mannequin/structure. And Anthropic successfully spun out of Open AI. And DeepSeek clearly leveraged off Open AI/ChatGPT. And fashions/groups will clearly proceed to bootstrap/leverage off pre-existing knowledge/fashions/groups on the street to AGI & ASI – in spite of everything, that’s how human intelligence works too. And it’s now changing into much more apparent that AI is inevitably open-source, and can change into extra & extra pervasive in our lives through the cloud & (smartphone) edge computing.
Digesting all that, and weighing it up versus what DeepSeek’s simply achieved (to not point out Chinese language GPUs!?), the precise winners & trajectory of the {hardware} arms race are nonetheless not completely apparent to me…however however, Jevons Paradox in all probability does kick in, ie the cheaper/higher/sooner AI will get, the extra we use, the extra underlying {hardware}/infrastructure we’ll inevitably want whatever the precise quantum of required value/effectivity/and so on. Due to this fact: i) to purchase (& truly hold holding!) the likes of Nvidia, and so on. may nicely show difficult alongside the best way, so timing & entry worth will probably be critically necessary, but in addition ii) Alphabet committing to $75B in capex spending for 2025 is completely the proper technique – by way of its cashflow (& money pile), it’s clearly an inexpensive guess, whereas not making the funding may show an existential risk.
However I’m extremely assured the last word beneficiaries of AI are the businesses who can truly plug it in & monetize it seamlessly in all features of our each day lives, our smartphones (& smart-glasses), our laptops, our autonomous automobiles. And naturally Alphabet’s already THE apparent/profitable candidate – and sure, Apple is one other candidate, as are Alibaba & Tencent behind the Chinese language firewall – because it at the moment boasts seven totally different merchandise/platforms with 2 BILLION+ USERS EACH (all of whom can already entry/use Gemini). Which in my ebook makes $GOOGL the most important & finest AI guess you may make right here…and in addition an apparent potential hedge for the remainder of your portfolio, your work-life & your loved ones.
FY-2024 (30)% Loss. Yr-Finish 15.8% Portfolio Holding.
KR1 was a giant disappointment in 2024, and watching Bitcoin rally 120%+ & hit new $108K+ all-time-highs alongside the best way, whereas KR1 truly fell (30)%, was clearly painful for a lot of shareholders. [Again, I should obviously highlight this follows a +268% gain for KR1 & massive out-performance vs. $BTC/$ETH in 2023]. Alas, this divergence was not solely sudden, and undoubtedly not the primary time we’ve seen this specific film…once more, I’d sum it up as:
$BTC ==> $ETH ==> #alts ==> #KR1
The funding & the features come first in Bitcoin (whereas $BTC maximalists triumphantly declare $ETH/#alts/and so on. are all going to ZERO!), then unfold out/rollover into (bigger) features in Ethereum, then spill over into (even bigger) features in #alts, and at last ship (doubtlessly exponential) features for KR1. [Rem, my last major KR1 write-up caught this inflection point perfectly back in late-2020, with the KR1 share price doing a 15x & the valuation multiple expanding from sub-0.8 P/B to a 2.5+ P/B in just three months!] And no, I don’t assume it’s totally different this time…positive, the regulatory acceptance & institutionalization of Bitcoin final yr might have delayed the standard roll-over into Ethereum (‘solely’ up +46% final yr), however I’m hopeful this new/secular crypto allocation course of (into investor portfolios) will mitigate/eradicate the standard crypto summer time/winter cycle(s) so far.
So sure, I’m assured the true features for $ETH, #alts & KR1 are doubtlessly nonetheless forward. And I feel $BTC maxis must be lauded & mocked right here…ie they principally persuaded the world that blockchain is an extremely beneficial expertise, however nonetheless need the world to consider such a foundational expertise ought to/will probably be restricted to a single ‘software’ developed/launched 16 years in the past!? Which appears fairly foolish to me…so let me repeat my thesis:
‘Bitcoin’s finally a guess on worth…blockchain’s a guess on innovation!‘
And that’s what KR1 is – from day one, it’s eschewed Bitcoin & proof-of work, focusing as a substitute on investing in early stage crypto/blockchain tasks (which in flip, primarily give attention to constructing out the whole/inter-connected infrastructure of the crypto universe) & on producing proof-of-stake revenue. And recognising it’s nonetheless a brand new expertise (& asset class), the KR1 group constructed the corporate to outlive any form of volatility – as a result of crypto beta is unavoidable – so that they targeted on diversification, and prevented all the standard debt, dilution & catastrophe different crypto-stocks have been so lethal at delivering for his or her shareholders. I name it the ZERO funding thesis…KR1 boasts ZERO {hardware}, power use, debt, dilution, taxes & capital required!
Over the past 8.5 years, this endurance & the distinctive alpha of KR1’s diversified early-stage portfolio has truly delivered the best-in-class crypto-stock funding monitor report on the planet…ie a +75% pa/11,125%+ return in each KR1’s NAV/share & share worth. No different crypto-stock (or stonk) comes shut. And no different crypto-stock generates any form of recurring revenue, not to mention free money circulate…whereas KR1’s truly generated a mean £14 million pa in staking revenue during the last three years, together with £13.0M in FY-2024 (& an £11.4M run-rate in December) vs. a present £86M/$107M market cap!). And notice there’s an precise 95% NET margin on that staking revenue…and I don’t imply the bullshit margin nonsense crypto-miners (for instance) present, I actually imply a 95% revenue margin with zero {hardware}/power prices, zero incremental G&A, zero curiosity prices, zero taxes & zero capital required.
That being mentioned, KR1 is not a widows & orphans inventory…it’s nonetheless primarily quoted on Aquis (albeit, it’s an RIE similar to the LSE), spreads may be vast, it might probably require endurance to construct (& exit) a place, and it might even require a full-service dealer commerce! Which is outwardly such a tall order, you’ll be able to nonetheless purchase KR1 on just about the most cost effective crypto-stock a number of (a 0.82 P/B as of year-end, a lot the identical as end-2023 (a 0.84 P/B) & again in Jul-2016 (a 0.85 P/B), with the share worth/NAV notably decrease once more YTD), regardless of it boasting one of the best +75% pa monitor report on this planet! And many KR1 punters will complain & moan the group may/ought to do a greater job…which is clearly grossly unfair, noting their spectacular monitor report. I’d put it extra diplomatically…there’s an excessive amount of cash (inc. the group’s, since they now personal ~25% of KR1, so that they have loads of skin-in-the-game/alignment with fellow shareholders) being left on the desk right here, once you evaluate KR1 to the (a lot larger) multiples & cash flowing to different/vastly inferior crypto-stocks, and many icing to be added to the cake (so as of precedence):
i) Add an expert in-house IR/PR operate & guarantee in addition they have some skin-in-the-game – there’s a military of potential traders on the market who nonetheless do not know KR1 exists, and/or want a very good IR story to even take into account researching/shopping for the inventory.
ii) Up-list/dual-list KR1 from Aquis to the London Inventory Change – once more, that draws a brand new military of potential traders – if David Lenigas can up-list his newest promotional crypto-stock (Vinanz) to the LSE in a matter of weeks, then the FCA, LSE & KR1 group have little excuse to not do the identical.
iii) Re-activate KR1’s share buyback authority, coupled with an expert IR/PR marketing campaign, to soak up staking revenue, improve NAV/share, enhance investor sentiment & increase KR1’s valuation a number of.
iv) Re-accelerate the tempo of funding – the group invested in three new tasks in 2024 (Tanssi, Mode & Avail), which stack up/construct on its present unlisted portfolio, since there’s usually a 2-3 yr journey to main-net nowadays – however that present pipeline will must be topped up/re-filled sooner or later.
Once more, I feel it’s now prudent & smart for all traders to contemplate a 3-5% crypto allocation of their portfolio, and I’d suggest a long-term KR1 holding as a diversified portfolio/best-in-class funding monitor report that may fulfill some/all of that allocation. [If preferred, along with some $BTC ETF exposure…I do not recommend leveraged $BTC ETFs or vehicles (like $MSTR or the crypto-miners), or any promotional crypto-stonks with no track record of creating any real intrinsic value]. And for fellow traders, I’m additionally alerting you to the just-released information of Redstone Finance’s upcoming main-net – KR1 invested in its 2021 & 2022 pre-seed/seed rounds, and my default assumption is that they find yourself with ~1% (ie someplace between 0.8% & 1.2%) of the venture/1.0 billion $RED provide – KR1’s $0.4 million funding in Redstone so far is immaterial vs. its present NAV, however as we’ve seen earlier than (with Celestia, for instance) the potential worth of its upcoming $RED allocation may show very materials to KR1’s present £86M/$107M market cap!?
Okay, that’s it – when you have any questions, please simply ask.
And better of luck in 2025..!
