By Jacob Wolinsky. Originally published at ValueWalk.
David Neuhauser of hedge fund Livermore Partners discusses the fund’s performance for the first quarter of 2022.
2022 has started off shaky with massive headwinds. We have war in Europe with a major superpower and shortages in many key supplies (ag, oil, materials) required for even basic needs. This is shaping up to be one of the most difficult periods in the world today and yet capital markets were acting fairly calm. Until now..
Q1 2022 hedge fund letters, conferences and more
Much had to do with the perceived earnings power of corporate America and the strength of the consumer. Coming off trillions in pandemic induced liquidity by central banks and Government, spending has remained robust. Although with a massive amount of M2 money supply in the system today, it created record inflation levels not seen for 40-years and has turned the historic term “FED PUT” into more like believing, “the FED is BUYING PUTS!” thus starting a downward cascade in both stocks and bonds. The asset bubbles in many areas of the economy are now under stress. This is something Livermore has been stating in many interviews for the past year and a half. See our CNBC January 2021 interview.
Included in this early viewpoint, the Biden stimulus could ultimately burst the stock market bubble and inflation is in a “structural shift” and technology stocks such as ARK Innovation ETF (NYMARKET:ARKK), Meta Platforms Inc (NASDAQ:FB), Carvana Co (NYSE:CVNA), Tesla Inc (NASDAQ:TSLA), and many others may witness strong downside (Livermore January 2022 fund update letter. “The great unwind has begun”).
That reality has now come true. With ARKK and Carvana especially hit hard and down appx 50% YTD. Recall our view on ARKK Innovation back in late 2021 and again in early January.
Livermore’s Portfolio
We recently covered shorts in those names but continue to monitor situations to help hedge our book, as short exposure has fluctuated between 3-9percent for the fund. Not huge given we are normally defensive anyway. Our portfolio today remains heavily invested in oil, gold and other commodity companies with some technology short positions layered in at times. Our core longs have been Jadestone Energy (LON:JSE), Vista Oil & Gas (BMV:VISTAA), AEX Gold (CVE:AEX), Energean (LON:ENOG), Kolibri Global Energy (TSE:KEI) and other select situations tied to hard assets.
Kolibri has worked out very well to date in 2022 as Livermore backstopped an equity rights offering which the company used to drill and help unlock their vast PUD(proven undeveloped) oil reserves valued at near $200mm. KEI is a small, $100mm US-based oil company from Oklahoma which has now returned our investors a gross rate of return of just over 250% YTD for the side-pocket Livermore hedge fund. Great to see especially with $100 crude remaining constant.
All this reflects that even within the carnage, there is value under the surface. Therefore, we remain steadfast and continue to look for unique events and special situations to put capital to work in.
I’ll share more as the year progresses and, in the meantime, attached is our most recent interview on CNBC discussing Netflix Inc (NASDAQ:NFLX) and the demise of the FAANG’s. Livermore Strategic Opportunities, LP as of this note, remains positive in 2022(SPY down 12%, QQQ down 20%) with a current YTD through April 27th of approximately 5% YTD. Essentially flat for April even as the major indexes have plunged.
Yours Sincerely,
David Neuhauser
Livermore Partners
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