22 10/21 22/10/2021

Weekly Newsletter Week 42

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WEEK 42 | OCTOBER
WEEKLY NEWSLETTER

 

OVERVIEW

  • Financial Markets & EconomiesQ3 Results
  • Good to knowSupply Chain Disruptions
  • Your portfolio highlights Solar Special Value Fund, Aimia
  • In other news: Berkshire Hathaway Names Warren Buffett’s Daughter and Money Manager Chris Davis to Its Board, Reliance buys 52% of top Indian fashion label in luxury bet, Brookfield Reinsurance Closes $10 Billion Reinsurance Deal with American Equity Investment Life Insurance Company, Ambani Accelerates Push Into Green Energy With Solar Deals
Financial Markets & Economies

Oil prices continued their rise in the past week topping $83 per barrel. It’s not just oil, natural gas prices were also on the rise due to low supply levels all around the world. Companies rushing to stock up on gas before the winter also helped push prices higher. Publicly traded companies are now starting to report their Q3 results which can affect investor’s market outlook for the rest of the year. Analysts are estimating an earnings growth of 27.6% for the companies included in the S&P500 index.

In other news, more than 130 countries around the world have agreed to the proposal of a 15% minimum global tax rate. This has been proposed to lower tax avoidances worldwide. This will lead to a spike in reshoring as large corporations head back to their home countries. Think about companies such as Google, Apple, and Facebook which are all headquartered in Europe right now for tax purposes. The approval of the minimum global tax rate is estimated to increase the U.S. tax revenue by as much as $150 billion.

 
Good to Know

There have been shipping shortages and delays around the world which led to a spike in shipping costs. Port delays, worker shortages, and covid outbreaks have all affected the flow of goods between countries. It has gone so far that mega retailers such as Costco, Walmart, and Home Depot are all chartering their own ships at the moment. These shortages and delays are upping inflationary pressures on corporations which in turn passes these down to consumers so to hold their profit margins steady.

The increasing oil prices discussed in the previous section only adds fuel to the fire. Although it can be beneficial for energy investors, it can manifest as inflationary risk for transportation and industrial stocks. In a recent survey, investors indicated that the current supply chain issues are their major concern when it comes to their investment returns. Luckily, these supply chain issues are temporarily. Governments and corporations around the world are getting creative in easing this disruption.

*The chart above shows the increasing supply chain disruptions since the beginning of the year.
 
Your Portfolio Highlights
 
The Solar Special Value Fund (SSVF) seeks substantial capital appreciation by investing in international publicly traded equity securities. The Fund concentrates its research and capital on special investment ideas that are trading far below their intrinsic value. These can be undervalued conglomerates, family businesses or other special investments. As the risk-return tradeoff states, potential return rises with an increase in risk. The holdings in the SSVF therefore have higher return potential, but the Fund also takes on a higher risk compared to the Solar Value Fund (SVF). The Solar Special Value Fund returned +21.12 year-to-date. In the spotlight this week we have the Canada-based company, Aimia (TSX:AIM).
 

Aimia Inc. is a holding company that focuses on long-term investments in both public and private companies. These companies are located all over the world and are free cash flow generating businesses in a diverse range of industries. Some of the companies they hold either controlling or minority stake in are Kognitiv (a technology and loyalty services company), Mittleman Investment Management (an asset management company), TRADE X (an automotive trading platform), and Clear Media Limited (an outdoor advertising company). Aimia was incorporated in 2008 as the successor of Aeroplan Income Fund.

Aimia benefits from a significant available cash amount and liquid investments in the public market, a debt-free balance sheet, an attractive capital structure, and a sizeable tax los that offers the potential to shelter future gains and income. The company seeks minority or controlling stakes in cash generative businesses with expected internal rate of return of 15% or more. These are businesses with durable economic advantages, high barriers to entry, and that are owner operated. An additional way the company seeks to add value for its shareholders is through buybacks. Aimia has repurchased over 40% of its common stocks over the past 2.5 years at an average price of $4.16 net of fees.


*Please visit the Aimia Inc.  website for more information or click one of the images below for their latest presentation.

 
 
Aimia Inc. | year-to-date stock performance
In Other News
 
We wish you a pleasant weekend and hope you stay safe.

Kind regards, 
Shernel Thielman 
Investment Manager 

www.solar-asset.com | shernel@solar-asset.com 
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