Diversification can't consistently beat the market over the long term
I am not a fan of diversification. I believe that through diversification you can't consistently beat the market over the long term. I invest in 2-3 sectors and 2-3 stocks in each sector. My approach is simple: I do top-down analysis, find the most undervalued sectors then go all in (well almost) in 1-3 stocks in those sectors. Of course, the downside is, if I am wrong then it will hurt. In 2021 and 2022 I was 100% and ~90% all energy respectively. This year my energy exposure has been anywhere between 15%-25%. It has been a drag on my overall portfolio, however since my portfolio was over 50% in META $Meta Platforms(META)$ (now about 35%), I am doing fine. As 1st half of 2023 is coming to an end, I increased my energy exposure to ~25% as I believ
LNG bulls better hope for high LNG prices for these projections to pay out
$WTI Crude Oil - main 2308(CLmain)$$Micro WTI Crude Oil - main 2308(MCLmain)$$E-mini Crude Oil - main 2308(QMmain)$ -Cracks are still very, very strong. -Refinery throughput is highest in the last 4 years. -Implied product demand keeps improving with both gasoline and jet fuel demand sitting comfortably above last year. Yet, it's a demand problem! Oki.Natty production has dropped below 100 bcf/d for the 1st time since Feb 10/23.ImageOn the other hand, LNG exports look 🤮ImageLNG bulls better hope for high LNG prices for these projections to pay outImagePrice assumptions for different scenarios.Image
$WTI Crude Oil - main 2308(CLmain)$$Micro WTI Crude Oil - main 2308(MCLmain)$$E-mini Crude Oil - main 2308(QMmain)$ WTI levels remain intact. Bulls need a clear break above the $74 area to set up the next move higher towards $80ish.Gasoline 2.935m Distillates -0.301m Cushing 0.05mImageHow is it a demand problem when cracks are as strong as ever with below $70 WTI? Yeah, crude time spreads look weak but to me, that has more to do with short-term oversupply than anything else.Image
$WTI Crude Oil - main 2308(CLmain)$$Micro WTI Crude Oil - main 2308(MCLmain)$$E-mini Crude Oil - main 2308(QMmain)$How is it a demand problem when cracks are as strong as ever with below $70 WTI? Yeah, crude time spreads look weak but to me, that has more to do with short-term oversupply than anything else.ImageSince September 10/2021, crude oil released from SPR averaged ~417k bbls/d. That would rank as the 32nd highest crude oil-producing country in the world.Crude oil released from SPR was 1.7m bbls for the week ending June 16/23. ~21.6m bbls done, ~4.4m bbls to go. ImageCrude oil stocks in SPR are now down ~376.6m bbls from their ATH.