Newsletter Sampler: Popular Delusions by Calderwood Capital

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Name: Popular Delusions by Calderwood CapitalFrequency: Semi-monthlyAudience: Professional investors & HNW individualsModel: PaidAuthor(s): Dylan Grice & Tim BerginTopics: Macro and deep dives into specialist managers, sectors, themes and individual securities in equities and fixed income

Overview: As Investment Advisors to the Altana-Calderwood Specialist Alpha Fund (ACSAF), Calderwood Capital sits at a unique informational vantage point, being active in some of the hardest-to-reach corners of international capital markets.

In their research to ACSAF investors they triangulate that information, working hard to understand both traditional financial markets (equities, credit, government bonds and commodities) and less traditional ones (cryptocurrencies, catastrophe risk, synthetic credit and private credit).

Each report has three sections:

• Words: Macro commentary often gained from their insights talking to more obscure managers

• Actions: Actionable ideas on particular asset classes, sectors or securities. A typical equity idea incorporates a deep dive into the sector. They look for value and large upside optionality. Recent ideas include, Japanese Regional Banks, US Cannabis, Canadian REITS and US Biotech

• Reflections: Book reviews, interviews and ideas that inspire them

SPONSORED BY CAMBRIA FUNDS:

Today’s email is brought to you by Cambria Funds, an ETF issuer providing investors with global market exposure and low-cost, quantitative-driven strategies.

Cambria’s mission is to offer differentiated strategies to help investors preserve and grow wealth with strategies spanning from global asset allocation, value, and even tail risk hedging.

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Disclaimer: Investing involves risk, including possible loss of capital. Cambria ETF’s are distributed by ALPS Distributors Inc.

Highlight #1: The Death of Duration (November 2019)

This piece states the past four decades have been the Golden Age for duration assets, with the bull market in government bonds helping spur returns in corporate bonds, public equities, private equity, venture capital and real estate. It assesses why it happened and why they believe another decade of the duration trade is unlikely.“today’s conventional investment wisdom will be tomorrow’s folly: liquid will be the new illiquid; rapid turnover the new patience; niche strategies the new index trackers.”

Highlight #2: The Height of The Pandemic (March 2020)

“Which areas are the most attractive? We don’t think it really matters at the moment. More than any time in the past, most investment ideas today ultimately boil down to the same investment decision: “risk on” vs “risk-off”.”

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Highlight #3: The Cockroach Portfolio (October 2020)

This piece looks at how you can construct a portfolio seeking to survive any environment. It led them to the cockroach, which has survived over 350 million years by being robust. The resulting Cockroach Portfolio, allocates to four asset classes – equities, government bonds, gold and cash.

Highlight #4: Crash Risk and Japanese Regional Banks (January 2022)

This piece looked at two areas:

1. Elevated Crash Risk: This part covers inflation, which at the time was 7.5%, and why they believed the markets were underwriting the risk of a policy error too cheaply.

“The speed of the acceleration, the co-movement of its constituents and the absence of the dispersion we’d expect to see were the situation characterized by isolated supply side, issues all point towards a more fundamental problem we think the Fed are on the wrong side of.“

2. Japanese Regional Banks: They lay out the bull case for Japanese regional bank stocks, which could be bought (at the time of the writing in January) at a PE of ~13x, EV/EBITDA multiple of ~10x, and at a discount to their equity holdings. They look at why they believed stocks were cheap, what the potential catalysts may be, and the risks associated with them.

To learn more about Popular Delusions, click here

Good investing,

The Idea Farm Team