Model Portfolio
The model portfolio’s return is +34.63% YTD compared to +24.52% for the S&P500, and +72.63% versus +45.85% for the S&P500 since inception (September 2022). The model portfolio, as of Friday’s close, is as follows:
This week, we made a move in the model portfolio: we sold Seplat at 195p/s, reflecting a loss since our purchase, and added Cresud S.A at $13.365/s (the ADR $CRESY). Seplat has been a clear investment mistake: we entered expecting a transformative deal, aligned with what the company announced in 2021, albeit assuming terms like the stake or lockbox structure with Exxon might be renegotiated. With the final closure announcement, we have seen that these assets are subject to a very different fiscal regime than what Seplat had promoted, effectively amounting to an 85% profit expropriation, making the investment highly unattractive. We take this lesson forward for future decisions.
Now, let’s review the main developments among the companies in the model portfolio for the week:
Warner Bros. Discovery
Comcast and Warner Bros. Discovery have strengthened their strategic alliance through long-term agreements ensuring the distribution of a vast content catalog in the United States, the United Kingdom, and Ireland. This deal secures the continuity of linear networks such as TNT, CNN, and Discovery while expanding premium content options by integrating ad-supported versions of Max and Discovery+ into streaming bundles. In the UK and Ireland, Sky, part of the Comcast group, will integrate Max into its entertainment offering, solidifying its market position and paving the way for the service’s launch in 2026.
Additionally, the company has announced a new corporate structure aimed at increasing strategic flexibility and unlocking additional opportunities to create shareholder value. This reorganization establishes Warner Bros. Discovery as the parent company of two distinct operational divisions (compared to the current three):
Global Linear Networks
Streaming & Studios
Global Linear Networks will focus on maximizing profitability and free cash flow through the operation of renowned TV networks offering news, sports, scripted, and unscripted programming. Meanwhile, Streaming & Studios will aim to drive growth and generate strong returns on invested capital, consolidating its position as a global streaming platform and film studio with an extensive portfolio of globally recognized intellectual property. The market responded positively to this news (+15%), as it is seen (as I interpret it) as a move to facilitate a potential M&A transaction or spin-off in the near future.
Adriatic Metals PLC
Adriatic Metals has reported significant progress in its Vares silver operation, marking a record quarter in production. Currently, Rupice Mine is operating from two active fronts, with commercial production levels expected by December 2024 and stabilization in January 2025. By the end of November, the mine had extracted 129,194 tons of ore, with an additional 40,000 tons projected for December. The 2025 guidance remains in the range of 750,000 to 800,000 tons extracted, supported by the 24/7 operation of the Vares processing plant, which continues to report steady improvements in metal recoveries.
Financially, Adriatic has strengthened its liquidity position by securing a $25 million concentrate prepayment agreement with Trafigura, featuring competitive terms, lower interest costs, and improved payment conditions. This agreement complements Orion Mine Finance’s decision to postpone the first $19 million quarterly debt payment from December 2024 to March 2025, alleviating financial pressure during the production ramp-up phase and reducing the likelihood of a capital raise. As of November 30, 2024, the company held $23 million in cash, complemented by $8 million in inventories and accounts receivable.
Operationally, the construction of the Veovaca tailings storage facility is progressing as planned, with the initial phase ready to receive waste by January 2025, ensuring production continuity. Simultaneously, extracted zinc and lead-silver concentrates have shown improvements in quality and recoveries..
Another good week of value creation by portfolio companies.
Disclaimer
LWS Financial Research is NOT a financial advisory service, nor is its author qualified to provide such services.
All content on this website and publications, as well as all communications from the author, are intended for educational and entertainment purposes only and should under no circumstances, whether explicit or implicit, be considered financial, legal, or other types of advice. Each individual should conduct their own analysis and make their own investment decisions.
