2022 in Review: +144.74% and my current portfolio

Luck vs Skill in investing

'This piece is an opinion and for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.'

2022 was wild. Crypto Ponzi schemes collapsing, Russia invading Ukraine, high inflation, Sri Lanka collapsing and Musk buying Twitter. It was exhausting. Most markets went lower, with the SPY being down 20% and my benchmark MSCI World being down 17.74% (MSCI World performance is in Euro).

My portfolio was lucky. With 144.74% I had my best year so far, and it might be the best year I will ever have. Returns are likely to go down, and I would not be surprised to be down 30% in 2023. First, a big thanks to the people who made that performance possible. Without their insights and stock ideas, I wouldn't have been able to achieve those results. @calvinfroedge, @orrdavid, @contrarian8888, @Mayhem4Markets, @agnostoxxx, @Edark94, @benbakhshi, @InaTailHedged, @NICKRADICAL4, @MuffinmanMagic, @DeepSailCapital, @mfwarder, @hkuppy.

Luck vs Skill

The reality is, that a lot of my performance this year was luck. Through coincidence, I found people and companies that helped my performance. I found my best performing stock, Peabody Energy through Nick Radical on Twitter in early 2021 - but I wouldn't have found him if I hadn't joined Twitter to follow short seller Jim Chanos. I wouldn't have found my second-best performer YPF without calvinfroedge - who I only found because contrarian8888 (who is invested in Peabody as well) had a conversation with him. Without those coincidences, the performance this year would have been much worse, but everything worked out. My longs went higher, and shorting overvalued technology companies went great. Despite my performance, tho, it feels like I have made way too many mistakes.

Performance drivers

Long Peabody Energy

The biggest performance driver by far was Peabody Energy. It was responsible for around 23% out of the 144%. I found it first thanks to Nick Radical and first invested into it in mid 2021. As the position went on to become too big, I cut it and diversified into other coal stocks like WHC, ARCH, YAL and AMR. I am still invested into Peabody, and I am looking forward to them paying off the debt and distributing the earnings to shareholders.

Long YPF

I bought calls when the price was 3.5.$. The company was priced for bankruptcy, but traded at less than 1 P/E and I thought that a small option position would do no harm. Those calls 5x and as it got too big for comfort I sold them when the stock was around $7.5. If I held until today (with the stock at 9.19), it would have been another double - but from a risk management perspective it was the correct decision. In growth stocks, we have seen people's gains evaporating and turning into loses. This is one thing that I want to avoid. Other long positions that drove the performance were BTI, CRESY and UAN.

Short in Carvana, Tesla and other unprofitable growth companies

I have already written about my short in Carvana and has been skeptical of Tesla's valuation as well. Carvana and Tesla were my biggest short positions and as they declined made around 13% of my performance. Other tech high-flyers companies like AFRM, TRUP, NVDA, CDLX, COIN, CRM, DASH, DKNG, MSTR, NIO, PLUG, LCID, RIVN, RUN, RBLX, SQ, TEAM and TTD made the rest. Here the positions were mostly small as I try to capture as much performance as possible without risking my portfolio. I also made some mistakes, tho. Sometimes I shorted going into earnings, which pretty much always went wrong. I also ignored technicals several times and regretted it as the market bounced (which is why the portfolio declined from June - August).

Mistakes

I already mentioned that shorting into earnings and ignoring technicals were some of the mistakes I made on the short side, but there were others as well. The biggest one was probably selling too early due to volatility. The thesis in Thungela Resources did not change, yet I sold. While the stock doubled, it would have been a 10x if I had held until the end of the year. In the future, if I am unsure of a position -  I will ask myself if it is due to the volatility or if the thesis really changed.

Another mistake was that I underestimated the madness of a dictator. I had 2% of my portfolio in Gazprom as the Russian invasion progressed. I was paralyzed and did not sell my position quickly enough -  so it is stuck in my brokerage account reminding me of my mistake. Not only that, but I also mistook the energy cycle with the agriculture cycle and as a result lost some money in IPI and MOS. While they did not influence the performance of the portfolio in a big way, it was a grave mistake nonetheless.

I have already talked about my mistake in Turning Point Brand, but that was another one.

2022 was a year when I learned about risk management, managing emotions, valuing companies and the market in general. I hope that 2023 will be as successful (though I doubt it).

Current Portfolio

Here is my current portfolio. Keep in mind that I can be hyped about a position one day, and short it the next one. I am long with 85.45% and short with 55.61% which is 29.84% net exposure and 70.16% in cash.

Coal stocks 21.46%

ARCH, BTU, WHC and YAL are 21.46% of my portfolio with BTU being the biggest. Coal stocks are still very cheap and even when the coal price halves (which I expect it to do, given that nearly all other energy commodities declined by around 50% as well), the dividends and buybacks would be enough for around 15% returns.

Japanese Basket 7.47%

These are nearly all equal weighted, with Zigexn (3679) being slightly bigger than Z-Holdings (4689), Casio (6952) and Itochu (8001). I am bullish Japan given the weak yen and that deflation seems finally behind them.

Offshore stocks 7.73%

These are the latest stocks that I bought and include BORR, DO, NE, RIG, SDRL, TDW and VAL. Given the consolidation of the industry and the amount of bankruptcies, I think that returns will start to look better for them. Day rates for drill rigs are finally rising, and the stocks are extraordinarily cheap based on replacement costs and potential earnings. Transocean (RIG) is the best on the operational side, so it is the biggest position in the basket - however to mitigate black swan events like the Deepwater Horizon oil spill, which can bankrupt even the best operators, I am diversifying here.

LATAM Stocks 25.72%

The currently biggest basket is my exposure to Latin America. Petrobras (PBR) and Ecopetrol (EC) are the biggest position, followed by Cresud (CRESY) and its warrants. Furthermore, I have a small position in Bancolombia (CIB). These companies are either very undervalued based on their assets (Cresud is probably among the cheapest stocks in the world here), or they pay great dividends at even $40 oil. Additionally, the prices are depressed due to the political uncertainty. I read extensively about the legislation in Brazil and Colombia and think that the discount is too much given the risk.

Diversified Metals/Materials 5.07%

Glencore is a great-diversified commodity trader and producer. The technicals look great as well, and it pays a decent divided.

Hall of Shame 1.1%

Gazprom. Nothing more has to be said.

Others 9.22%

I recently purchased a position in Lion Rock Group (which is still very small) and hold OTCM and GRVY as well. Another relatively big position around 5% is Kaspi (KSPI) the fintech company from Kazakhstan. While it isn't cheap, the dividend and buyback make it attractive in my eyes.

Hedges 7.68%

I have a few put hedges to protect myself against some violent downturns. I usually roll these once the expiration date is closer than half a year. They include puts in Apple, CAT, CELH, DE, FSLR, QQQ and a disaster call for Tesla to hedge my short position.

Short basket -55.61%

My diversified short baskets in companies that either are unprofitable and/or just extremely overvalued. It includes AAPL, BROS, CACC, DASH, FSLR, MSTR, NVDA, PLUG, RIVN, RUN, SNOW, SPOT, TRUP, TSLA -  with Tesla being the biggest position.

Conclusion

Please comment if you have anything to say about my portfolio, or what you are bullish on the next year.

I wish you all a happy new year and a great 2023!