26 11/21 26/11/2021

Weekly Newsletter Week 47

Newsletter week 47

 

 

 


WEEK 47 | NOVEMBER
WEEKLY NEWSLETTER

 

OVERVIEW

  • Financial Markets & EconomiesOil Supply
  • Good to knowCarbon Credits
  • Your portfolio highlights Lunar Value Fund, Aalberts
  • In other news: Biden Reappoints Powell as Fed Chair
NOTE: It was brought to our attention that a local financial institution will shortly suspend its investment services. If you or an acquaintance is considering another asset manager to take over a portfolio, feel free to contact us for a no-obligation appointment to discuss your financial goals and how we can be of service. 
Financial Markets & Economies

After a long rally of oil prices due to supply shortages, President Biden announced that he will be tapping into oil reserves as part of the administration’s ongoing efforts to lower gas prices for consumers. Oil and oil services companies around the world reported impressive earnings so far in 2021 with the increasing oil prices acting as tailwind. Most of these companies projected that oil prices may lose momentum in the end of the year and included this assumption in their calculations and guidance for the rest of the year.

We have talked about booming sales in previous newsletters in almost all industries in the U.S. The housing market is not an exception but has been slowing down due to rapidly increasing prices. The benefit of the historic low interest rates is being outweighed by the stark price increases. Home prices are about 20% higher this year. This is good for homeowners but not so much for homebuyers. In other news, there is sign of easing supply chains. The ports of Los Angeles and Long Beach which are the two busiest port complexes in the U.S. both reported significant advancement in port congestion. There was a 33% decline in aging cargo on the docks.

 

Good to Know

As you know already, we are convinced of the energy transition and the opportunities it created. One of the newer concepts in the energy transition space is the use and trade of carbon credits. Carbon credits are permits that allows the holder (company) to emit a certain amount of carbon dioxide or any other greenhouse gases. One credit permits the emission of a mass equal to one ton of carbon dioxide which is equal to a 2,400-mil drive.

Companies and nations that pollute are awarded carbon credits that allows them to continue to pollute up to a certain limit, but this limit is reduced periodically. Any unused carbon credit can be sold to other companies that needs them. Since many countries and more than 1,500 companies around the world announced plans to become carbon neutral by or before 2050, they can definitely make use of carbon credits in this transitioning phase. The ultimate plan with carbon credits is to reduce the number of credits over time so to incentivize businesses and nations to find innovative ways to reduce their greenhouse gas emissions.
 


What good are carbon credits? Carbon credits incentivize businesses to reduce their greenhouse gas emissions in two ways. First of call, a company will be fined if it surpasses the set limit. Secondly, if they are frugal with their emission allowances, they are able to sell this and make a profit. In other words, carbon credits can be used as a marketable security. The fact that the allotted credits are tradeable makes it ideal for the balancing of global emissions.

There are companies now focusing on bringing the streaming model used in the mining and energy sector to carbon credits. The streaming model entails that companies provide funds for carbon neutral projects in exchange for future payoffs. Carbon credits are anticipated to become integral in reaching the global net-zero goals. This can already be seen in the market. The compliance/ regulated market was estimated at $261 billion in 2020 which is five times larger than in 2017. The voluntary market crossed the $1 billion mark this year and is expected to become $50-$100 billion per year in the coming years. Carbon credits is clearly another way investors can benefit from the much-anticipated energy transition.
 
Your Portfolio Highlights
 
The euro-denominated Lunar Value Fund (LVF) invests in undervalued European stocks which are selected after conducting thorough fundamental analysis on the companies rather than simply following general equity market movements. The Fund is long-only and concentrates its research and capital on mid-cap companies chosen from a carefully defined universe of quality industrial and consumer products and services companies. The Fund appreciated by +15.86% so far this year. One of the underlying companies worthy of mention is the Dutch company, Aalberts N.V.
 

Aalberts N.V. (AALB) is a Dutch manufacturing company founded by Jan Aalberts back in 1975. The company prides itself on the engineering of mission-critical technologies for ground-breaking industries and everyday life. Industries serviced includes but are not limited to aerospace, automotive, e-mobility, medical, oil & gas, engineering, and semiconductors. The company operates in over 50 countries and consists of four technology groups. These are Piping Systems, Surface Technologies, Hydronic Flow Control, Advanced Mechatronics, and Fluid Control.

Leading niche technology positions, high entry barriers, pricing power, innovation speed, and fast learning & adaptation are among the things that set Aalberts apart. The company’s mantra is that good is never good enough and greatness is made out of shared knowledge. These are what drives Aalberts forward. The company grew more than 50% this year and is thus one of the main contributors to Lunar Value Fund’s performance in 2021.  

*Please visit the Aalberts N.V. website for more information or click on the image below for their latest presentation.

 
Aalberts Corporate Short Movie- Relentless
 
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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