July Portfolio Update: Betting on Energy Volumes, Not Prices

July has ended, and it’s now time to make an update on everything that has happened this month: some views on the market, new ideas, reviewing and assessing conviction in the positions we hold, and taking a look at what could present interesting opportunities in the following months.

As I noted last month, I have started advising an investment vehicle here in Spain where I apply my investment strategy. Returns since inception around two months ago have been around -4%, not bad considering some upfront fees the vehicle had to pay and the performance in small caps outside of the US market where we are mostly invested. Before advising the fund, I posted the Buried Bargains portfolio here in Substack, which achieved 64.3% in 2025 and 6.9% until May 2026.

This month has been better than June, when we suffered from a large drawdown in energy and mining related equities, but I still believe that our portfolio remains incredibly undervalued and expect the following months to include some good catalysts that should help the market rerate these stocks.

Additionally, for the first time in a long time, I am seeing more opportunities in the market than cash I have for them, with many write-ups planned for the coming weeks and months, and many other names I am still in early research on. I am quite excited with all of the cheap names that there are in offshore, which are paying extremely high dividends and offer very good rerating potential if the cycle turns upwards. I talked about some of these high yielding securities in this article:

Another sector where I am spending a good amount of time is in NPL related names, buyers, servicers, etc. Quite good prices for very antifragile businesses. I developed on the top-down thesis in this article:

Now let’s talk a bit about the market. In terms of the energy picture, everything looks like the last month but worse: conflict in the Middle East region continues, prices of oil and gas are stronger at spot, and the forward curve has strengthened a bit. I continue to believe that betting on higher oil volumes is the best bet in this environment. Despite being many months into the conflict, practically none of the predictions that were made by the oil bulls ended up happening. Maybe those things will still happen, but I am too dumb and lazy to have an opinion on that, or maybe smart enough to realise that I have no edge in predicting oil prices and might have a better shot in small cap owners of offshore vessels or small rental companies servicing natural gas rigs in Canada. As I’ve been saying for the last quarters, the energy sector has strong tailwinds going into the next decade, and not only due to AI (although that’s definitely a plus) but due to a growing middle class in developing countries and years of underinvestment. A similar thesis holds in the mining sector. If you combine an attractive sector with low valuations and some clever stock picking in small caps to get some of the best risk reward names, I think the situation can lead to great returns.

On AI, things have been ugly recently: Sandisk is down 50% over the last month. But it’s still 269% up YTD and 2,241% up over the last year. I am not eager to call this a hated sector yet, many names are trading at single digit forward valuations, and it’s undeniable that the hardware manufacturers are printing cash. But I believe the question is still the same: is there end client demand at the real cost of inference? There aren’t many arguments to say that’s true. OpenAI and Anthropic have been in a price competition for months. Over the last 3 months I think I’ve got multiple 2x boosters of my token spend for free, and I, like many other people I know, use tokens like monkeys. They are so cheap that I don’t care about optimising stuff, but as soon as they increase prices I will swap or improve process efficiency, which reduces inference demand. Still, I don’t have a clue if the rally has ended. Let’s think about the following:

So much capital has already been deployed that new investment might actually have the best marginal returns. If spending another $100B can increase the chance of getting a payout on the $600B you’ve already deployed, maybe you do it, because the math works on the payout on the $700B.

It’s much easier for investors to give you another $10M when they have already put in $100M that will return nothing if you don’t make it work. This clip from The Big Bang Theory (one of my favourite series) explains it perfectly.

“You can’t go to the board of directors and say you gave Sam Altman half a trillion dollars to build AGI and have nothing to show for it. The only way to save face is to double down, and then double again and then double again…”

So, since Altman probably wasn’t as kind as Sheldon in explaining to his investors how many times they needed to double down, we could see another rally as investors double down again. But that’s speculation, and that’s something I usually just reserve for micro caps with sketchy management teams that will never do a buyback even if they trade at net cash.

Now it’s time for a portfolio review.