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April -0.6%, YTD -13.3%

I said in the last update my objective for April was to degross my book and get rid off my 1.4x leverage. Unfortunately, I didn’t get much time to do so (my insight arrived too late) as Trump shocked the world on April 2nd with tariffs higher than anyone expected and my “performance” slid to -19% at market open on April 3rd. I sold everything relentlessly, raised 20% cash (wich I deployed on the “it’s a good time to buy” April 9th again) and now sit fully invested but not levered.

As markets recovered for the remainder of April, I almost finished the month flat (-0.6%) despite having basically cut all of my margin at almost the bottom. My YTD is now -13.3%. I cannot believe what I am seeing when I look at markets though - it is incomprehensible to me that indices were flat in April, despite everything that transpired. I am ultra bearish and think the market will go much lower over the rest of the year. I just cannot believe that businesses will make significant investments during this uncertain backdrop and hence I think big parts of the economy will come to a grinding halt and a recession is inevitable. As the real economy prints negative data points over the remainder of the year (margins anyone?), stocks should tumble. And I don’t think the FED will come to the rescue so quickly.

As a consequence, I have attempted to position my book in a way that is hopefully very disconnected from the real economy and to a large degree event-driven.

My biggest position is GLASF, now comprising >20% of my book. Recession proof, 50% growth in 2026, 4-5 catalysts to hit over the next 12 months and a possible jackpot scenario of regulatory change on the federal level. Best management team I know of, strongly competitively advantaged business, and, importantly, will make money no matter what happens to the economy. If I had to pick one stock to allocate all my funds into and not look at it for 10 years, it would be GLASF (If I did this, I am sure an earthquake would destroy the SoCal facility…). I actually spoke to

Christian Schmidt

from the great Hidden Returns Podcast about pitching GLASF when it was $4 earlier this month, but unfortunately missed the opportune time window as I couldn’t make a recording slot and then the stock ran up and up: GLASF closed at $7.05 yesterday. My conservative price target is $20 in 2028 and I would have really liked to pitch a “5 bagger in 4 years” on the podcast. Oh well, maybe I get another chance when the markets take another tumble.

Essentially the same size is my investment in SOC (I hold a lot of SOC in another account). While it does trade with oil, the main driver of PnL in SOC will be the binary outcome of whether or not Sable gets oil flowing or not. In a positive scenario, I expect to at least double my money on SOC over the next 8 weeks (I think the commons should 2x, but I have some options as well). If SOC does not get to production, I will incur a gigantic loss, which will set me back financially in a meaningful manner. Holding SOC for the past 6 months has been an absolute nail biter however, and if it weren’t for my friend

BR Kelleran

from

Kontrarian Korner

I might have already folded: new issues keep appearing out of nowhere, the timeline keeps getting drawn out, oil has come down more than 20% over that time frame as well, short interest keeps going up, and Sable communicates only minimally with its shareholders, keeping us in limbo. It is an utterly uncomfortable position and I hope it gets resolved over the course of this month. Just like with SAVE, I am betting that reason will prevail: I don’t care where you stand politically, if you have 2 brain cells you will have to agree that it makes no sense to prevent Sable from turning on production - it is better for the climate, for the fauna, and for the US economy. Here’s a poem on the topic:

https://x.com/FriendlyCapMgmt/status/1915692456143696221

Next in line, with ca. 11.5% of NAV, is my investment in NN. This too, is entirely event-driven. If the FCC drops an NPRM in NN’s favour in H2 2025, it will rip, if it does not, well… let’s just say, I will be looking for another investment then. My game plan for NN is to cycle the gains (fingers crossed) from my Sable Options into NN options before July and take my NN exposure also up to 20% prior to the “hot” period where movement by the FCC is likely.

So all in all, I have ca. 50% of my investments in 3 names which I think should be mostly protected from a recession. If I add other positions like NXSN, ZEG, ACHV, MREO which are either disconnected from GDP growth or tied to events, I get to sth closer to 65%. Of course, when push comes to shove and correlations turn to 1, they will all get hit, but I am kind of hoping that they will rerate appropriately at event-date.

Obviously NN and SOC have very wide ranges of outcomes and this year could end with me looking like an idiot or hero, depending on how these binary events unfold. I think I have decent odds, but I also thought that with SAVE, and well, look where that got me. I also thought that Sable will get to production before year end 2024, and here I am, still bag holding, coping and abusing

BR Kelleran

as my therapist (Hey Ben, if you read this: any news???).

It’s not lost on me that I increased the left tail risk in my portfolio massively by upsizing recession-proof but ultra binary positions. So far it clearly isn’t working. It would be funny if SOC and NN both end up not working and I lose 25% of NAV on them AND then we still get a recession and I loose another 25% of NAV across the rest of my book. Or maybe: SOC works but oil goes to the 30s and the stock rerates from $15 to $20 and all my options expire worthless. I would need a real therapist then, and donations from all of you, to pay for him…. :-(

Below is the portfolio. I will probably sell 10-15% of NAV in the next few days and either dump it in IBIT, hold it in cash, or put a little bit in Nasdaq puts. I think we’re going down over the next 8 weeks, and I think we’ll likely take out the April 7 lows (or whenever it that was exactly).

Best,

Friendly