Mining Opportunities with Crescat’s Kevin Smith and Tavi Costa

ValueWalk’s Raul Panganiban interviews Kevin Smith, CFA, Founder, CEO, and CIO and Tavi Costa, Partner and Portfolio Manager at Crescat Capital.

Q2 2020 hedge fund letters, conferences and more

Mining Opportunities with Crescat Capital’s Kevin Smith and Tavi Costa

Transcript:

Raul Panganiban: Hello podcast listeners. Today is a very special episode with Kevin Smith, CFA, Founder, CEO, and CIO and Tavi Costa, Partner and Portfolio Manager at Crescat Capital. Kevin brings 28 years of investment management experience spanning. He earned his MBA from the University of Chicago and his Bachelor’s in Economics and German Studies from Stanford. Tavi has been with Crescat for 6 years where he built their macro model that identifies the current stage of the US economic cycle through a combination of 16 factors. Tavi earned his Bachelors from Lindenwood University in St. Louis. In today’s episode we discuss the current state and where they find opportunities in the present environment. We discuss the current conditions where they find opportunities and their activist approach in the mining sector. I want to welcome Tommy and Kevin to the show, and I want to welcome all our listeners to a very special episode.

Unknown Speaker: Welcome to ValueTalks with Raul.

Raul Panganiban: So just wanted to welcome all our listeners to a very special episode. Back on the episode is Kevin Smith, CFA, Founder, CEO, and CIO of Crescat Capital and Tavi Costa, Partner and Portfolio Manager at Crescat Capital. And Kevin and Tavi. Welcome back to the show.

Kevin Smith: Thank you Raul.

Tavi Costa: Thanks for having us.

Raul Panganiban: All right. Last episode, we covered a lot of ground and the market has come back. And as everything is getting back to normal and reopening. We’re approaching the same levels before the COVID crash. So I just want to begin with the S&P and one of your charts that you’ve shown, has the stock market at unstable technical extremes can tell me more about that?

Tavi Costa: Yes, I think you’re referring to the RSI chart, in which Kevin also has combined a lot of technical indices that also show the the same sort of imbalance in the technical side. It’s incredible how the macro and the fundamental side already is undeniably bearish. But at the same time, the technical side is also becoming part of it to the sentiment in our view is euphoric. I mean, we’re now seeing some bears capitulating. It’s time before the Robin Hood traders now trashing the in depth research of 10Ks and 10Qs and mocking Warren Buffett and investing in bankrupt companies and saying fundamentals don’t matter. It’s incredible how we switch from a depression sort of sentiment to now this euphoric narrative and you know, when we look at fundamentals for instance, the profit margins continue to fall apart and we don’t see any any real rebound in CAPEX estimates from companies we chose the perhaps economic activity is not coming back anytime soon. Even the Fed’s own economic activity index has just declined again recently, which is in total contrast with equities at record valuations, as you just mentioned, when we looked at other measurements of economic activity like restaurants, restaurant bookings, and that was just slowly moving hired or a TSA number of travellers also doing the same, certainly not the rocket ship recovery that we were told, but don’t buy Trump. And so I think those are the biggest issues in the markets today that maybe Kevin can add to that, but it’s certainly in our view, reminds us a lot of February it feels like we’re in February, again, when market was in total disconnect with reality.