Mea culpa: I know tweeting an exceptional (but entirely undocumented!) annual return figure on Jan-1st is now de rigueur for FinTwit, but I’ll stick to my usual approach, so apologies again for being a bit late with my 2024 annual review. But hey, hopefully some of you were still anticipating it…and this far from the madding crowd, it now proves a more leisurely (& useful) read! And while we’re at it, I should of course apologise for still being on WordPress, not Substack. For still plugging away doing this 13+ years later. For still having no paywall/€XXX annual subscription (I mean, what’s his bloody game?!). For still disclosing actual portfolio changes, essentially on a real-time basis, and providing a fully documented/auditable performance track record & position sizes – yup, NO look-back buys/sells, after-hours trades, and/or undisclosed hedges here! – one of the very few, if not the only (free) investment blog left on the planet (still) doing this. Whoops…and for still calling it an investment blog, for God’s sake!? And most of all, for still having no blue checkmark on X…
I know, maybe I should be thinking about changing all that…after all, it’s human nature for people to value what they actually pay for, versus what they get for free, regardless of the actual quality, quantity, and/or value involved. And constantly being demoted by the X algorithm (duhhh, no checkmark & useful third-party links in most of my tweets!) is no fun either. On the other hand, I don’t need the money, and I don’t fancy a new ‘boss’. And call me old-fashioned, or just plain old difficult, but I love having genuine skin-in-the-game with a stock, its management & fellow investors – it’s the ultimate alignment with readers & followers who actually research & buy the same stocks I own – and the unavoidable reality with any paywall/subscription is that you quickly exhaust your major portfolio holdings & end up recommending stocks in which you’re barely invested, or don’t even own at all! I guess embracing that path (& its rewards) is the name of the game, and arguably it’s perfectly fine if your customers receive fair warning…but for me, the ‘compensation’ I value from the blog is knowing fellow investors have (ideally) multi-bagged with me, and at worst feel the same pain & hopefully lose less money than I do on some (inevitable) losers.
[To be fair: In my first (Wexboy) decade, my win ratio was actually 70%, which I concluded was (perversely) too high…ie I needed to re-train my attitude to risk & force myself to start adding more smaller/riskier holdings, which would presumably decrease my win ratio, but also (I suspect) increase my long-term returns overall.]
But time to crack on here – my FY-2024 Benchmark Return is still a simple average of the four main indices that best represent my portfolio, and it produced a benchmark +11.6% gain:
These returns are so predictable now, it’s become more & more absurd at this point…the S&P 500 wildly outperformed its long-term average returns again (& delivered the usual 3/4x return of the FTSE 100 & STOXX Euro 600), and whatever the specific underlying reasons*, mathematically this obviously can’t continue indefinitely. [*Duhhh, it’s the Magnificent 7…which saw the Nasdaq close up +28.6% last year]. While the ISEQ performed somewhere in between these two extremes, a return to form after an unexpectedly S&P-like performance in 2023. Investors obviously remain generally suspicious of smaller companies, with the FTSE 250 up +4.7%, while the Russell 2000 closed up +10.0% (decent, but a fraction of the S&P/Nasdaq). [It was another down year for the AIM All-Share, at (5.7)%, making the consistently positive returns of so many AIM/small-cap portfolios on UK FinTwit even more tiresome]. Elsewhere, returns weren’t much different for the MSCI Emerging Markets USD Index (up +5.1%) & the MSCI Frontier Markets USD Index (up +9.5%), but crypto again delivered spectacular returns with Bitcoin up +121% & Ethereum up +46%.
This year I’ll resist the urge to opine more about the markets: We’re only at the start of another Trump presidency, US national debt’s starting to spiral out of control (even if DOGE succeeds, won’t the ‘savings’ be spent on tax cuts anyway?), we’re likely to see a wave of anti-incumbent/elite populist movements & governments for years to come in the West (both left & right), I suspect we’re probably nowhere close to finished with an exceptional AI-driven bubble market (which drags technology & crypto higher too)…and after all, nobody really knows anything!? So it’s every man for himself – there’s plenty of risk out there, but also plenty of opportunity to come – your portfolio & investing style will increasingly depend on what you actually have the stomach to believe in & what you have the patience to sleep comfortably with each night.
So let’s rip the bandage off here – here’s my actual Wexboy FY-2024 Portfolio Performance, in terms of individual winners & losers:
[Gains are based on average stake size (NB: NO actual changes in holdings, except for an imperceptible increase in TFG due to its DRIP) & end-2024 vs. end-2023 share prices. All dividends & FX gains/losses are excluded.]
And ranked by size of individual portfolio holdings:
And again, merging the two together – in terms of individual portfolio return:
I’m obviously none too pleased with a (9.6)% loss for the year…it’s not disastrous in absolute terms, but it’s obviously a huge under-performance relative to my actual benchmark. Not to mention, a fraction of the returns generated by every random FinTwit über-portfolio out there (of course)!
KR1 is clearly to blame here (& Record doesn’t help). If I’d limited myself to the sub-3%/5% KR1 holding I consistently recommend to other investors, my overall return would have been reasonably positive, and if it was absent from my portfolio I’d have broadly matched my benchmark return last year. But I didn’t, and it wasn’t – which offers some delectable schadenfreude to the usual suspects – you’re welcome!
But this also illustrates why the whingers & haters do so badly in the end…they just don’t have the vision, or the stomach, or the patience, or the perspective, to actually find them (early) & then actually hang on to the genuine/long-term compounders. And of course they won’t remember (or won’t admit) that in the prior year, KR1’s NAV/share was actually up +178%, the share price itself was up +268%, it was a major driver of an overall +65.4% gain in my portfolio, and it’s an uncomfortably large position today simply because it’s turned out to be such a huge multi-bagger for me over the last 7+ years! Clearly, this is a high-quality problem to have…
But longer-term readers & followers already see/know this – I’ve written hundreds of thousands of words over the years on this blog about investing & specific investments, and in recent years it really just boils down to: i) winners keep winning – the challenge isn’t finding them, it’s actually holding on to the high quality compounders through thick & thin to compound your wealth, and ii) diversifying your portfolio as much as possible – and I see NO real evidence of that in 95% of the portfolios I encounter on X & the internet – to also help protect your wealth. And ironically I realise that the less I write now on the blog, the less I chop & change positions, the less I add new write-ups, the better I illustrate & drive home that ‘hold & diversify’ lesson. And again, in terms of results, the +26.0% pa returns from my first decade here (again, fully documented along the way!) are a great endorsement…and while my 15 year returns obviously remain a work-in-progress, I’m very happy with my long-term (private) returns, which of course are a key reason the blog actually exists & my former/now forgotten career no longer does! So, yeah:
Hold…and diversify!
And with that, let’s do an annual review of my current (disclosed) holdings:
i) Donegal Investment Group ($DQ7A.IR)
FY-2024 +0.6% Gain. Year-End 0.7% Portfolio Holding.
[NB: Year-end holding reflects (0.1)% impact of the latest return of capital (approved in Nov-24 & settled end Jan-25).]
Deal, or no deal?! Well, still no (final) deal…but at least Donegal Investment Group announced another return of capital before year-end. This reflects a continued build-up of net cash to €9.7 million (inc. a bond investment maturity), as of November – unfortunately, only half the cash was actually utilised, ie €4.8M to redeem 18.15% of all shareholdings at €16.50/share (100% for holdings of 50 shares or less), which given the facts seems far too conservative here. But it’s now retired another 19.1% of Donegal’s o/s shares, reducing the net share count to 1.23M shares.
We also saw a welcome +11% increase in seed potato sales (to €33 million) for FY-2024, albeit revenue does oscillate depending on annual yields/pricing. Underlying operating margin was unchanged at 5.0%+, but the division can deliver 7-10% margins in its best years, plus it fully absorbs Donegal’s central (board/listing/etc.) costs, so I still see a 1.0 to 2.0 P/S deal multiple range as fair, in particular accounting for its intellectual property portfolio, its (fully expensed) R&D spending/pipeline & additional cost/revenue synergies in the hands of a larger acquirer. [The Nomadic Dairy sale achieved a 1.8 P/S multiple, for comparable reasons]. Minority investors should also be reassured by the directors’ 6.5% stake & Pageant Investments/Nick Furlong’s 12.7% stake in Donegal, which should ultimately incentivise & deliver a compelling deal.
Post-capital return, Donegal holds €4.9 million in net cash, €0.6M in investment property & a €0.7M/20% investment in Uktal Seeds (India), versus a €20.3M market cap (at €16.50/share), so investors are currently valuing the seed potato business on a 0.4 P/S multiple!? Which leaves plenty of low-risk/event-driven upside on offer here…alas, it’s 3+ years now since the Nomadic sale & we still have no public confirmation of a final seed potato sale process (or of Donegal itself), but meanwhile the company pays its way with a 1.8M pa net profit, so my main frustration here is actually the near-zero trading volume & my inability to re-up my position.
FY-2024 (5.3)% Loss. Year-End 0.8% Portfolio Holding.
Another (small) holding just marking time here…though a +7.4% yield made for an overall gain last year. [Yield’s higher again today at +8.0%, per the higher/proposed dividend]. The company did appoint a new CFO (internally), but otherwise it’s basically business as usual. Annual pelt volumes normalised back to 10.5 million in FY-2024, but a +20% increase in prices delivered a mere (3)% decline in total brokerage sales to €343M. Unfortunately, a lower take rate & unexpectedly low financing income meant earnings per share nearly halved to €0.73/share. However, this is attributable to a poor H1, with pelt volumes down sharply by (35)% in the key March auction, so H2 eps of €0.68/share seems far more indicative of Saga’s current run-rate, and is supported by a restructuring which eliminated expense in the defunct Dutch & Danish markets, plus some additional local personnel/rental expense. [Justified as a response to lower volumes, but could/should be a nice tailwind as scheduled FY-25 volumes (at 10.0M) are in line with the medium-term average of 10M+ pelts, and financing income ideally picks up again]. Management certainly seems to be indicating this with a 97% payout ratio (ie a proposed €0.71/share dividend).
That H2 annualised run-rate is €1.36/share, not far off the average €1.51 eps we saw in the last four years (vs. a 10.7 million pelt average), which pegs Saga Furs on a 6.5 P/E, vs. a €8.90 market price today. Alas, there’s little sign investors will award a higher multiple, in the absence of any kind of sustained growth trajectory. That being said, you collect a +8% yield, and value investors on X & the message boards tend to rediscover Saga every two/three years & bid it up to €12.00+ & even €17.00+ price levels, at least temporarily. And there’s still the possibility of Chinese acquirer (alas, a Russian bidder’s off the table), but who knows the timing/IRR of such an outcome. Ironically, the best outcome here would be an actual (phased) shutdown of the fur industry in Finland/Europe…in that scenario, I’m quite confident a Saga Furs wind-down would deliver its current €25+ NAV per share, so how about one last ESG win?!
iii) Tetragon Financial Group ($TFG.AS)
FY-2024 +42% Gain. Year-End 3.5% Portfolio Holding.
[NB: Year-end holding reflects a new (pre-yearend) 1.0% increase in my position, as I confirmed Jan-1st on X.]
2024 was (finally) a real inflection/breakout year for Tetragon Financial Group, with investors enjoying a +42% share price gain (& a +4.5% yield). This reflects a +15.4% NAV/share total return – its best in years, again reinforcing its longer-term record of low-volatility 9-10%+ pa net returns – and a narrowing of Tetragon’s NAV discount from 68% to a still astonishing 60%. [Worth highlighting: Even with zero NAV gains/dividends, that relatively small discount compression would have still delivered a +25% shareholder gain!] Crucially, it also helps silence the haters – who were always happy to trot out their usual misconceptions, lies & ancient history here – further improving sentiment, with the stock up an additional +10% YTD & hitting new all-time-highs). And I’d expect further gains ahead, based on anticipated developments this year with some key investments…not to mention a fresh wave of buying IF the shares ultimately trade $19/$20+ a share (per my usual rule – most punters only get interested after a share doubles!).
There were three main NAV drivers last year: The first was Hawke’s Point, which finances high quality mining projects in the Australian (& North American) resource sector – its value grew almost +70%/+$80 million last year, net-net, albeit masking significant (downside) volatility along the way from a peak $320M value as of end-October. [One can hardly complain about the overall net gain!] The second is Ripple Labs A&B Preferred Stock, which gained an astonishing 130%+/$135M+, in the last two months of the year, reflecting its SEC win earlier in the year, the election of Trump & a new crypto-friendly administration in November, and a subsequent four/seven-fold gain in $XRP’s market price. Third, we saw a +25%/+$185M gain in Tetragon’s 75%+ stake in Equitix, received the welcome news in October of an actual sale process (still ongoing today), and confirmation TFG’s stake had increased to 81.5% but would now accrue a tail/profits liability to former Equitix management (for the moment, I’m assuming it still nets back out to an effective 75% stake). All told, less dividends & a measly $25M tender offer – that’s less than 1% of NAV & barely 40%+ of the tender offers in 2023 – those gains in value net out to a near-$350M NAV increase last year.
This year, hopefully we see an actual sale of Equitix – a £1.5 billion price tag has been floated, vs. $14B+ of AUM, reflecting other recent deals & a voracious appetite for alternative/infrastructure asset managers. That price may be a bit rich, but I’d expect an actual deal to still offer significant upside for Tetragon’s 75%+ stake, vs. a year-end $922 million value. [Which would again confirm the (prudent) valuations assigned to TFG Asset Management, which is currently valued at $1.6B vs. $41.2B in AUM (up 50% from $27.4B at end-2019)]. And such a deal could obviously equate to 80%+ of Tetragon’s current market cap – and net debt’s still under 10% of gross assets, so there’s no pressing need to repay any of it – so that’s where the rubber really meets the road:
Either Griffith & Dear flex their control muscles, attempt to reinvest the cash & personally collect the fees on the management contract for another 5/10 years, OR they actually focus on enhancing/realising shareholder value via a massively accretive tender offer for a huge % of Tetragon’s o/s shares. The former was investors’ default assumption to date (& rightly so), but as the principals age out (& want to potentially revalue/realise their own stake), and TFG’s other management/employees lobby re their steadily growing stake, and noting the sheer scale of this potential deal, the odds shift in favour of the latter…clearly it’s still an entirely event-driven scenario, but IF we see a sale & IF we see a massive tender offer, then we’ll also see a step-change in sentiment & the NAV discount. Further, let’s hope we can also add some crypto pixie-dust to the equation – back of the envelope, Tetragon now owns somewhere between 2.25%-2.5% of Ripple Labs, whose private market (equity) value is currently worth something like $14/$15.5 billion today, vs. its actual treasury of 43.3B+ $XRP, which is currently worth something like $107B! That’s a hell of a value gap, one that could potentially be closed/realised via what I’d call an anti-$MSTR strategy, ie (gradually) selling $XRP crypto & buying Ripple equity.
And Ripple Labs has already started down this road – executing two/three tender offers in the last year, funded from $XRP sales – a strategy that could attract a lot more attention & be further refined IF Ripple & Brad Garlinghouse actually propose an IPO, now that Trump’s in the White House. So yeah, it’s definitely a good idea here to do the math & figure out the potential/asymmetric upside for Tetragon on its Ripple Labs stake…vs. its current $1.3B market cap (& a potential/impending sale of Equitix).
iv) VinaCapital Vietnam Opportunity Fund ($VOF.L)
FY-2024 +2.6% Gain. Year-End 4.8% Portfolio Holding.
The VinaCapital Vietnam Opportunity Fund performance in 2024 – actually an overall 5%+ gain, including a +2.5% yield – looks very much like 2023, but again this obscures a much healthier Vietnamese market. The VN Index was actually up another 12%+, but this was mitigated by the dong depreciation we’ve seen over the last three years & which accelerated to (5.1)% in 2024 – not surprising, given the dollar strength we saw elsewhere in Asia (& globally). In terms of VOF’s London listing, a marginally weaker sterling helped, but shareholder returns were further hurt by a widening of the NAV discount from 18% to 23%+.
This reflects: i) the pervasive London valuation discount, which is often justified (domestically) but presents an incredible opportunity to buy into international exposure/companies on the cheap, and ii) continued investor aversion to any kind of frontier/emerging markets investment. The latter is particularly frustrating as Vietnam’s on the FTSE Russell watchlist to be promoted from Frontier to Emerging Market status, which would prompt significant inflows (regardless of the general investor apathy). It also belies the VOF team’s excellent in-house IR function, which provides regular/detailed communication with shareholders, periodic investors presentations & roadshows, a continuous share buyback programme, and ensured a seamless portfolio management transition after the untimely death of Andy Ho (VinaCapital’s CIO) last June.
Needless to say, the short & long-term outlook are still as promising as ever. Vietnam is the new China – it has a young & relatively well-educated workforce which under-cuts China’s labour costs & can also move up the export curve, it’s already a primary market for China outsourcing, it has a strong trading relationship with the US, its GDP growth has accelerated to 7%+ while inflation’s steady around 3%, and despite some recent political in-fighting & musical chairs it does a far better/more relaxed job than China of balancing a capitalist economy vs. one party communist control. On the other hand, Trump’s tariff bazooka could present a new threat, but arguably political/tariff tensions with China will continue to support Vietnam as an alternative export market & a de facto China-US entrepôt. As for the market itself, it now trades on a 10.3 forward P/E, vs. 13-15%+ earnings growth (in 2024 & 2025), with the VNI trading just shy resistance at 1,290-1,310 (for almost three years now) & potentially all set for a major rally & new 1,500+ all-time-highs if this resistance level can finally be broken. Similar resistance & ATHs lie ahead for VOF, and meanwhile its portfolio mix of public equity, PIPE, OTC/pre-IPO stocks & real estate investments adds important & unique diversification versus its peer funds.
FY-2024 (25)% Loss. Year-End 5.1% Portfolio Holding.
[NB: After a YTD (12)% share price decline, I subsequently increased my position by +0.9% from 4.5% (at the time) to a 5.4% holding, as I confirmed Jan-18th on X. #REC’s rallied +17% since.]
Record managed to follow up a (22)% loss in 2023 with a (25)% share price loss in 2024…this was mitigated by a +7.3% yield, but still demands the obvious question: How was I so wrong about one of my largest holdings? Well, instead, I bought more #REC in January! Which seems like a direct violation of my usual mantra to ‘average up, not down!’…probably the hardest lesson any investor can hope to learn & master.
But it highlights an important nuance here – the focus is always on the business, not the share price – ie your best long-term compounders (inevitably) come from averaging up & into the rising KPIs/positive business trajectory of a great business (generally reflected in a rising share price/valuation), not averaging down on a declining business (even at an ever cheaper price/valuation). And also highlights the disconnect between short-term investors who obsess over the share price, the latest results (vs. broker consensus!?) & are easily suckered into the usual ‘price drives narrative’ spiral, versus investors who ignore the noise & focus on the long-term (absolute) growth trajectory of a business. In Record’s case, revenue’s up 75%+ & earnings per share more than doubled in the last 3.5 years, while AUM’s near an all-time-high at $100.5 billion…that’s what I’m actually averaging up on here.
Trouble is, in FY-24 & H1-25, Record has been: i) consolidating the aggressive AUM, revenue & earnings growth of the prior two years, ii) investing in higher wages & more employees, an IT in-house restructuring/redevelopment, and new products, business lines & AUM (inc. a new €1.1 billion+ infrastructure equity fund launch from its new 41%-owned RAM sub.) to diversify & support its medium-term growth strategy*, and iii) managing the transition to a whole new generation of management, in particular responding to the long-anticipated retirements of Leslie Hill & Steve Cullen with the appointment (internally) of Jan Witte as CEO & Richard Heading (ex-Group FD of IG Group) as CFO. This left eps flat/down marginally over the last year & a half, with the share price spiraling lower in response, compounded by a savage & relentless bear market in an otherwise unrelated UK-listed asset management sector (with most share prices hitting new 5/10 year lows in the last few months).
[*And yes, Witte & Heading clearly need to refine & reiterate this strategy at the next FY results. Exploring the idea of adding more external talent/partnerships like RAM would be very welcome too – recruiting a couple of the City’s top cold callers & deal closers would inject some killer instinct into the culture, and some external partnerships (for example, in Asia) would help tap what is a relatively unlimited potential TAM for Record’s FX business].
But isn’t that how markets work…earnings pause = degrowth = derating?! Yeah but, what’s the right multiple if Record delivered +23% pa eps growth over the last 3.5 years? A 25+ P/E might work, right? But that’s what Record actually delivered…except it was +46% pa eps growth over two years, then (2)% pa over 1.5 years! And hence, REC trades on a sub-10 P/E today (vs. H1 annnualised eps of 5.62p), and investors even question whether its current +9.5% yield is sustainable. [Yes, it is…noting 7.4p/share of surplus net cash & how sticky Record’s business actually is!]. Whereas I remain confident, as do former owner-operators Neil Record & Leslie Hill (who still own a 36%+ stake, in aggregate), of Record’s actual intrinsic value (and/or potential deal value!?) & its longer-term growth strategy – I fully expect the £60 million revenue & 40% operating margin targets that Hill originally set will be attained in due course, presuming continued AUM growth/diversification, good execution & substantial operating leverage, and will deliver 10p+ earnings per share accordingly. With REC trading 52p+/share again, breaking critical 58p support/resistance level would signal a return to its recent 62-70p price range…meanwhile, investors can buy a high quality recurring business on a 2.0 EV/Revenue multiple, versus a 31% operating margin, a 42% incremental operating profit margin over the last few years & ultimately a potential 65%+ incremental operating margin.
FY-2024 +36% Gain. Year-End 13.9% Portfolio Holding.
And what a juggernaut Alphabet is…it took 15 years to reach $100 billion in revenue, and only another 6 years to reach $300B! In FY-2024, revenue was up another +14% to surpass $350B (with YouTube & Cloud now on a $110B run-rate), operating profit was up +31% as operating margins continued expanding to 32%, and earnings per share was also up +31%. Which mirrors what we’ve seen over the last 5 years, with revenue more than doubling & operating profit/eps compounding at 27% pa. Which highlights how (absurdly) cheap the company still is here, trading on a 20.5 forward P/E. Which, for much the same reasons as I originally detailed, would imply a P/E in the teens for the actual core business…so $GOOGL’s multi-bagged since I first wrote it up in 2017 (‘So Why Not Google It..?’), but is still basically just as cheap today!
Yeah but, the haters chorus – what if Alphabet loses the AI Wars? And isn’t Search going to zero anyway…if Bing didn’t kill it off already?! And all the other questions they asked five years ago & five years hence, even though they might never actually step up & buy $GOOGL – why even argue with them, when every set of results are the only rebuttal needed.
But all that doubt & anxiety highlights a fundamental misunderstanding of the risks & opportunities. Zooming in on Search, it’s critical to realise its core monetization drivers are actually a rather limited (but incredibly valuable) sub-set of the entire universe of search queries – ie it’s primarily consumers researching & actually/potentially buying products & services, and Search remains the most efficient way to do that. And that’s why Google now happily provides an AI Overview for most queries – it enhances the user experience & doesn’t disrupt the underlying business model, since most queries aren’t necessarily monetizable anyway. That being said, we are on the verge of agentic AI, so Search economics will migrate into that user experience too, and/or become an actual recurring revenue subscription model via a personal digital assistant.
As for the big picture, it’s worth highlighting Google/Alphabet was/is the world’s biggest & best AI company (go on, try explain your life & the world pre-Google Search to your kids!?). And Open AI was built on Google’s Transformer model/architecture. And Anthropic effectively spun out of Open AI. And DeepSeek obviously leveraged off Open AI/ChatGPT. And models/teams will obviously continue to bootstrap/leverage off pre-existing data/models/teams on the road to AGI & ASI – after all, that’s how human intelligence works too. And it’s now becoming far more obvious that AI is inevitably open-source, and will become more & more pervasive in our lives via the cloud & (smartphone) edge computing.
Digesting all that, and weighing it up versus what DeepSeek’s just achieved (not to mention Chinese GPUs!?), the actual winners & trajectory of the hardware arms race are still not totally obvious to me…but on the other hand, Jevons Paradox probably does kick in, ie the cheaper/better/faster AI gets, the more we use, the more underlying hardware/infrastructure we’ll inevitably need regardless of the actual quantum of required cost/efficiency/etc. Therefore: i) to buy (& actually keep holding!) the likes of Nvidia, etc. could well prove challenging along the way, so timing & entry price will be critically important, but also ii) Alphabet committing to $75B in capex spending for 2025 is absolutely the correct strategy – in terms of its cashflow (& cash pile), it’s obviously an affordable bet, whereas not making the investment could prove an existential threat.
But I’m highly confident the ultimate beneficiaries of AI are the companies who can actually plug it in & monetize it seamlessly in all aspects of our daily lives, our smartphones (& smart-glasses), our laptops, our autonomous vehicles. And of course Alphabet’s already THE obvious/winning candidate – and yes, Apple another candidate, as are Alibaba & Tencent behind the Chinese firewall – as it currently boasts seven different products/platforms with 2 BILLION+ USERS EACH (all of whom can already access/use Gemini). Which in my book makes $GOOGL the biggest & best AI bet you can make here…and also an obvious potential hedge for the rest of your portfolio, your work-life & your family.
FY-2024 (30)% Loss. Year-End 15.8% Portfolio Holding.
KR1 was a big disappointment in 2024, and watching Bitcoin rally 120%+ & hit new $108K+ all-time-highs along the way, while KR1 actually fell (30)%, was obviously painful for many shareholders. [Again, I should obviously highlight this follows a +268% gain for KR1 & massive out-performance vs. $BTC/$ETH in 2023]. Alas, this divergence was not entirely unexpected, and definitely not the first time we’ve seen this particular movie…again, I’d sum it up as:
$BTC ==> $ETH ==> #alts ==> #KR1
The investment & the gains come first in Bitcoin (while $BTC maximalists triumphantly declare $ETH/#alts/etc. are all going to ZERO!), then spread out/rollover into (larger) gains in Ethereum, then spill over into (even larger) gains in #alts, and finally deliver (potentially exponential) gains for KR1. [Rem, my last major KR1 write-up caught this inflection point perfectly back in late-2020, with the KR1 share price doing a 15x & the valuation multiple expanding from sub-0.8 P/B to a 2.5+ P/B in just three months!] And no, I don’t think it’s different this time…sure, the regulatory acceptance & institutionalization of Bitcoin last year may have delayed the usual roll-over into Ethereum (‘only’ up +46% last year), but I’m hopeful this new/secular crypto allocation process (into investor portfolios) will mitigate/eliminate the usual crypto summer/winter cycle(s) to date.
So yes, I’m confident the real gains for $ETH, #alts & KR1 are potentially still ahead. And I think $BTC maxis should be lauded & mocked here…ie they basically persuaded the world that blockchain is an incredibly valuable technology, but still want the world to believe such a foundational technology should/will be limited to a single ‘application’ developed/released 16 years ago!? Which seems pretty silly to me…so let me repeat my thesis:
‘Bitcoin’s ultimately a bet on price…blockchain’s a bet on innovation!‘
And that’s what KR1 is – from day one, it’s eschewed Bitcoin & proof-of work, focusing instead on investing in early stage crypto/blockchain projects (which in turn, primarily focus on building out the entire/inter-connected infrastructure of the crypto universe) & on generating proof-of-stake income. And recognising it’s still a new technology (& asset class), the KR1 team built the company to survive any kind of volatility – because crypto beta is unavoidable – so they focused on diversification, and avoided all the usual debt, dilution & disaster other crypto-stocks have been so deadly at delivering for their shareholders. I call it the ZERO investment thesis…KR1 boasts ZERO hardware, energy use, debt, dilution, taxes & capital required!
Over the last 8.5 years, this staying power & the unique alpha of KR1’s diversified early-stage portfolio has actually delivered the best-in-class crypto-stock investment track record on the planet…ie a +75% pa/11,125%+ return in both KR1’s NAV/share & share price. No other crypto-stock (or stonk) comes close. And no other crypto-stock generates any kind of recurring profit, let alone free cash flow…whereas KR1’s actually generated an average £14 million pa in staking income over the last three years, including £13.0M in FY-2024 (& an £11.4M run-rate in December) vs. a current £86M/$107M market cap!). And note there’s an actual 95% NET margin on that staking income…and I don’t mean the bullshit margin nonsense crypto-miners (for example) provide, I literally mean a 95% profit margin with zero hardware/energy costs, zero incremental G&A, zero interest costs, zero taxes & zero capital required.
That being said, KR1 is not a widows & orphans stock…it’s still primarily quoted on Aquis (albeit, it’s an RIE just like the LSE), spreads can be wide, it can require patience to build (& exit) a position, and it may even require a full-service broker trade! Which is apparently such a tall order, you can still buy KR1 on pretty much the cheapest crypto-stock multiple (a 0.82 P/B as of year-end, much the same as end-2023 (a 0.84 P/B) & back in Jul-2016 (a 0.85 P/B), with the share price/NAV notably lower again YTD), despite it boasting the best +75% pa track record in the world! And lots of KR1 punters will whinge & moan the team could/should do a better job…which is obviously grossly unfair, noting their spectacular track record. I’d put it more diplomatically…there’s too much money (inc. the team’s, since they now own ~25% of KR1, so they have plenty of skin-in-the-game/alignment with fellow shareholders) being left on the table here, when you compare KR1 to the (much higher) multiples & money flowing to other/vastly inferior crypto-stocks, and lots of icing to be added to the cake (in order of priority):
i) Add a professional in-house IR/PR function & ensure they also have some skin-in-the-game – there’s an army of potential investors out there who still have no idea KR1 exists, and/or need a good IR story to even consider researching/buying the stock.
ii) Up-list/dual-list KR1 from Aquis to the London Stock Exchange – again, that attracts a new army of potential investors – if David Lenigas can up-list his latest promotional crypto-stock (Vinanz) to the LSE in a matter of weeks, then the FCA, LSE & KR1 team have little excuse not to do the same.
iii) Re-activate KR1’s share buyback authority, coupled with a professional IR/PR campaign, to absorb staking income, enhance NAV/share, improve investor sentiment & expand KR1’s valuation multiple.
iv) Re-accelerate the pace of investment – the team invested in three new projects in 2024 (Tanssi, Mode & Avail), which stack up/build on its current unlisted portfolio, since there’s generally a 2-3 year journey to main-net these days – but that current pipeline will need to be topped up/re-filled in due course.
Again, I think it’s now prudent & sensible for all investors to consider a 3-5% crypto allocation in their portfolio, and I’d recommend a long-term KR1 holding as a diversified portfolio/best-in-class investment track record that can satisfy some/all of that allocation. [If preferred, along with some $BTC ETF exposure…I do not recommend leveraged $BTC ETFs or vehicles (like $MSTR or the crypto-miners), or any promotional crypto-stonks with no track record of creating any real intrinsic value]. And for fellow investors, I’m also alerting you to the just-released news of Redstone Finance’s upcoming main-net – KR1 invested in its 2021 & 2022 pre-seed/seed rounds, and my default assumption is that they end up with ~1% (ie somewhere between 0.8% & 1.2%) of the project/1.0 billion $RED supply – KR1’s $0.4 million investment in Redstone to date is immaterial vs. its current NAV, but as we’ve seen before (with Celestia, for example) the potential value of its upcoming $RED allocation could prove very material to KR1’s current £86M/$107M market cap!?
Okay, that’s it – if you have any questions, please just ask.
And best of luck in 2025..!