Postcards: Five Investment Themes I Can’t Wait to Buy in 2024

I didn't watch the NFL today. Instead, I wrote this article for you... let's talk about energy investment, the Permian Basin, and how there is ALWAYS money in vanity.o                                                                                                                                                                                                                                                                                                                                                                                                                 Forwarded this email? [Subscribe here]() for more [Postcards: Five Investment Themes I Can’t Wait to Buy in 2024]( I didn't watch the NFL today. Instead, I wrote this article for you... let's talk about energy investment, the Permian Basin, and how there is ALWAYS money in vanity.o [Garrett {NAME}]( Oct 29   [READ IN APP](   Dear Fellow Expat: Two years ago, the Buffalo Bills lost a playoff game against Kansas City in the last 12 seconds. As a lifelong Bills fan, that was the final straw. I endured four straight Super Bowl losses. I didn’t go to Georgetown University because my visit was the same day as the Music City Miracle. I endured many losing seasons with quarterbacks named Nate Peterman, Matt Barkley, Alex Van Pelt, EJ Manuel, JP Losman, Trent Edwards, and Rob Johnson… I put up with the fact that Tom Brady of the New England Patriots (on another team) was the “winningest” quarterback at Buffalo’s stadium for a decade.   But something snapped in my brain when the Bills lost that AFC playoff game two years ago. It was the final straw. I have very little emotional investment in the NFL anymore. So – Sundays have become a day to look forward to the week ahead. And I’m not just focused on the next five days – I want to look to 2024 and where I plan to put money once this negative market cycle ends. Today, I’m highlighting five places where I’m VERY excited to invest in the year ahead. [Upgrade to paid]( No. 1: Natural Gas Exports During the first half of 2023 (six months), the United States exported more natural gas than it did for the same period of any previous year. America is awash in natural gas and stands to be the dominant global feeder of the potable energy source for the next few decades. The import-export chart speaks for itself. Exports are just booming… and we’re still in the early innings of a sector that is “actually working” sector in this economy. There are additional tailwinds that can drive America’s success forward. Europe continues to flounder from its ongoing green transition. Tensions in the Middle East could disrupt oil flows through the Strait of Hormuz and natural gas from Qatar. And it’s not like the world will somehow stop needing energy for Global GDP to expand. And there’s always the value argument on the natural gas front. In a great piece this week, the [Acquirer’s Multiple blog]( explains that several big money managers are betting on Cheniere ([LNG]( as the play for natural gas exports. Cheniere Energy is a leading US liquefied natural gas (LNG) company specializing in LNG export facilities and natural gas infrastructure. It partners with Chevron ([CVX]( and other leading players and has long-term contracts that will keep demand rolling through the 2040s. Fund managers pouring into Cheniere include Jim Simons, Israel Englander,  Cliff Asness, Ray Dalio, Ken Griffin, Joel Greenblatt, and Stephen Mandel. But you don’t have to buy it to make money… If you don’t want to deal with the short-term emotions of it all (and want to buy at a lower price if the stock really does pull back), one can sell the January 2025 $90-$100 put spread and generate 10.5% if the stock doesn’t fall under $100 within the next 14 months. This is an undervalued stock at $166. If you think the markets are breaking… then you’ll love it at $100 or less. That’s a case of just taking what the market is giving you. I’ll be digging deeper into this trend during the Fourth Quarter. [Share]( No. 2: Energy Midstream Closed-End Funds “There is always money in the Midstream” – that critical place that connects upstream oil producers to downstream refiners and retailers. Whether it’s pipelines or storage, the center of the energy supply chain is rich with potential. This land has strong dividends, favorable tax structures, and booming business – especially in the Texas oilfields. Traditionally, I’d eye companies like Enterprise Product Partners ([EPD]( and Energy Transfer ([ET](. The latter just saw its chairman engage in one of the largest executive buying sprees of the last 18 months. But both are Master Limited Partnerships. And while the tax structures are great, they involve a K-1 at tax time. Those filing forms can be a pain, to say the least. So, let’s turn our attention to a different type of investment: Closed-End Funds. The odd cousin of mutual funds and exchange-traded funds, these funds don’t connect to their Net Asset Value at the end of each trading day. That can lead the fund to trade at a discount or at a premium to the NAV. The head of SABA Capital, Boaz Weinstein, has been LOADING UP on a great midstream closed-end fund called the ClearBridge Energy Midstream Opportunity Fund ([EMO](. This fund trades at a 13.2% discount to its net asset value and pays a gross yield of 8.28%. The portfolio consists of many of the best midstream operators, including Energy Transfer ([ET]( Plains All American Pipeline ([PAA]( MPLX ([MPLX]( Enterprise Products Partners ([EPD]( and The Williams Companies ([WMB](. There’s only one better option in the closed-end space. And I’m keeping that one in my pocket for readers of the [Republic Risk Letter](. [Share]( No 3: Vanity When I was younger… in my mid-20s, I thought that maybe the worst economic crash since the Great Depression might lead humans to become less greedy and less self-absorbed. I had that thought for one day. It was the most naïve moment of my lifetime. I apparently left 3,000 years of evidence on the table. Humans don’t change. I came away with the perception that “There’s always money in vanity.” Whether it’s the Botox craze of the last decade or the expected surge in demand for weight loss drugs like Ozempic (Hollywood stars are claiming they aren’t taking the drug, which is just hilarious), there’s MONEY in vanity. But it’s not just the physical side of vanity. It’s also the brands and products that cater to the wealthy… or to the “perception of wealth” – the people who will try their best to showcase that they are wealthy despite the glaring fact that they’re likely in deep debt. Tim Melvin and I have talked for a long time about companies with great F scores and Z scores – and as I look at the list of companies that fit this level (Coca-Cola is there, by the way), I’m not surprised to see Prada spA ([PRDSY]( – the Italian luxury brand on the list. [Go back to what I said a few days ago.]( Look at the date this [business started]( 1913. Prada – an Italian brand – endured Two World Wars, one of the worst economies in Europe in the last two decades. It has an F score of 9. It has a Z score of 4.4 (there’s no debt in a world awash in it). And there is NO shortage of human beings who want to flash “Prada: Milano” in social scenes. There’s ALWAYS money in vanity. And the time to buy is at the bottom of the market cycle. It’s coming. [Share]( No. 4: The Permian Basin It’s not just that dealmaking in the Permian has been one of my favorite themes of 2023. It’s that there will be staunch efforts to drive down production costs. Exxon wants to get production costs down to $15 a barrel. I don’t care if oil falls to $60 at that point. The margins will be wonderful. There are terrific companies with long-term upside, like Occidental Petroleum ([OXY]( a Buffett-backed name. Occidental will continue to pay down debt and eventually reach an investment-grade level on its credit ratings. That’s just taking a little more time than expected. It helps to see that Buffett has been loading up on the stock for the last 18 months. But don’t be afraid to look for smaller names like Permian Resources ([PR]( which recently announced a deal to purchase Earthstone Energy ([ESTE](. Both were previous recommendations in our Permian push for 2023. I remain very bullish on PR and consider it a takeover target. I have another closed-end fund in the Permian that is absolutely incredible. I’ll talk about it this week in the [Republic Risk letter](. It’s a SCREAMING buy. [Upgrade to paid]( No. 5: The Russell 2000 (And Betting Against It Too) Wait… why would one “invest” in the Russell 2000… and bet against it for the year ahead? Well, this is at the core of what we do. We add the Russell 2000 when our Equity Strength Signal for the index turns positive, and we bet against it with an inverse fund when it turns negative. We buy the Russell 2000 ETF ([IWM]( when it's positive. And when it’s negative, we can buy the Inverse Russell 2000 ETF ([RWM](. But for people with a little more tolerance for risk, we can also use leveraged funds for the duration of those positive and negative cycles. For bullish (positive) times, there’s the Direxion Daily Small Cap Bull 3X ETF ([TNA](. And for bearish times, we have the Direxion Daily Small Cap Bear 3X ETF ([TZA](. When big capital flows back in, it can produce big gains. And when there’s a selloff, the upside is immense. The TZA is now up nearly 60% since our early warning on the Russell in August. This isn’t coincidence…  This is how we trade and play the market, so getting the recommendations is important when it’s time to switch signals. That’s what our members at [Republic Risk Letter]( receive every single trading day. I’ll be back tomorrow morning with my latest on all of the sectors and indecies. All right, that’s it for today. Stay positive, Garrett {NAME} Secretary of Defense You're currently a free subscriber to [Florida Republic Capital](. For the full experience, [upgrade your subscription.]( [Upgrade to paid](   [Like]( [Comment]( [Restack](   © 2023 Garrett {NAME} 548 Market Street PMB 72296, San Francisco, CA 94104 [Unsubscribe]() [Get the app]( writing]()