In July of this year, FMT wrote about the likely resurgence of the secular Bitcoin trend, suggesting that a 375% return or more in the upcoming cycle was well within reason.
That forecast seems to be materializing. Despite the ambitious price predictions, FMT doesn’t operate on wild-eyed speculations. We manage accounts as if they’re our clients’ sole funds, employing the proven principles of investing outlined by Benjamin Graham, Warren Buffett’s mentor.
Our overarching strategy, aimed at safeguarding funds over the long term, relies on two primary margins-of-safety. First, every asset purchase undergoes a two-part margin-of-safety test: does the asset possess a moat or competitive advantage? And does it present a price at a discount to its underlying value?
The second margin-of-safety is straightforward: non-correlated assets in our accounts are crucial. This ensures that no single factor can impede us from crossing the finish line.
In a previous note, I highlighted uranium as the first commodity entering a long-term secular bull market, which we are enjoying. FMT is bullish on natural gas for the next couple of years, foreseeing it as the next commodity to also experience a new secular trend, potentially rivaling the “375% or More” thesis behind Bitcoin.
Our top producer is performing exceptionally well, even in the face of short-term natural gas price weakness. Owning a low-cost producer in the most prolific natural gas region, managed by the sector’s best team, has minimized the impact of short-term spot price fluctuation and we’re up quite nicely thus far.
They’ve already repurchased close to 30% of their shares since implementing the repurchase plan. In a natural gas bull market, further gains and a short-term doubling is likely, with my research suggesting a multi-hundred percent return over the next few years, aligning with Bitcoin’s trajectory.
However, the key difference is that natural gas serves as a non-correlated asset, with potential global market implications in the event of supply tightness, akin to the uranium supply scenario.
The potential ripple effects are all-important. Rising natural gas prices in the U.S. could lead to soaring residential and commercial electricity costs, impacting the economy and discretionary spending by $300+ billion. Europe’s dependence on U.S. natural gas imports introduces yet another layer of complexity.
A tight natural gas market in the U.S. could prompt decisions affecting Europe. If LNG exports are restricted, the euro might take a significant hit against the dollar, impacting the DXY, and further weakening the U.S. economy. This real-world example illustrates why commodities needing material investment often outperform during economic downturns, emphasizing the disconnect between printing dollars and actual resources.
Regardless of economic scenarios, FMT remains focused on the strong fundamentals of natural gas and our top natural gas producer. Our assets provide insulation from potential fallout if tight natural gas markets unfold as I anticipate over the next 18 months.
The only lingering question is when to further position ourselves in a sector poised to shine while others dim.
P.S. A natural gas shortage could adversely impact electric vehicle sales underlining another interconnectedness often overlooked by most market observers.