Investing in Real Assets in a Digital World

Investing in natural resources and commodities is a tricky business. Investors in these sectors must look at individual companies and the macro variables that go into intrinsic values, such as future precious metals and energy prices. These prices are known to go through volatile cycles, the timing of which can be hard to get right.

Walking us through this process is Will Thomson, the founder and managing partner of Massif Capital. Thomson's fascinating journey took him from Afghanistan to Lloyd's of London before founding Massif Capital.

The Massif Capital Real Asset Strategy is a global long/short equity strategy built around bottom-up stock picking.  The firm is focused on creating a portfolio of businesses within the Energy, Basic Materials, and Industrial sectors that balance the environmental and economic realities of achieving a carbon-neutral economy.

Before founding Massif Capital, Thomson served as a strategic and economic advisor to NATO in Afghanistan. Cochrane and Thomson begin their conversation by looking at factors that might determine when emerging economies are ready for investment and when they're not. Specifically, Thomson details the elements that make Afghanistan a challenging place for profitable investments at this time.

Thomson describes Massif's strategy to Cochrane as one that is not focused on future commodities prices, a risky proposition at best, but one that instead drills down to specific catalysts for individual companies. For instance, if a copper mining company is trading at a steep discount to its net asset value (NAV), Massif Capital will take a closer look to explore its long-term prospects and how soon it can come to realize its true value. When inputting the future prices of copper into the equation, Thomson looks at its historical prices, including its 10-year lows, highs, and averages, to determine a realistic idea of how copper prices can react to a range of conditions.

Thomson also shares his unique perspective on ESG investing. To promote more meaningful change, Thomson believes investors should focus more on companies transitioning to a smaller carbon footprint than companies that will inherently enjoy such advantages because of their business model.

Thomson also looks for opportunities in green energy from political catalysts. When the Inflation Reduction Act was signed into law in August 2022, it included almost $400 billion in energy- and climate-related initiatives, making it one of the most significant environment-focused bills the U.S. Congress has ever passed. Thomson said while several companies will experience rapid growth from this sudden surge in revenue from the measures in this bill, only a few will be able to do so profitably.

Thomson believes Siemens Energy ADR (OTC:SMNEY) is one such company that will benefit from the bill's passage. Siemens Energy is an engineering technology company that manufactures a wide range of products needed by electric utilities, including wind and steam turbines, natural gas generators, grid technology applications, and hydrogen energy solutions. This makes it a one-stop shop for energy companies with various needs across different ways of generating and distributing power.

Centaurus Metals Ltd (OTC:CTTZF) is another company Thomson highlights as a compelling opportunity. Centaurus Metals is an Australian-listed mining company focused on developing a nickel sulfide project in Brazil. Geological tests indicate the project might ultimately produce 20,000 tons of Class 1 nickel annually, making it one of the world's largest, high-grade nickel mines. This is important because while lower-classed nickel can be used in applications such as stainless steel, only Class 1 nickel can be used for batteries. As electric vehicle usage expands, batteries may account for up to 35% of nickel demand by 2030 while only accounting for about 10% of nickel demand today.

---

Send in a voice message: https://podcasters.spotify.com/pod/show/7investing/message