Model Portfolio
Attached are the two main tracking materials we’ll obtain via this platform, along with a more detailed explanation:
In the first chart, you can see, for each period, the performance of our model portfolio (blue line) compared to the S&P 500 (green), the iShares MSCI EAFE ETF (yellow, representing developed markets outside the U.S.), and the Vanguard Total World Stock ETF (pink).
In the second table, we’ve added risk and performance metrics, such as the Sharpe and Sortino ratios, which indicate risk-adjusted returns (the higher, the better), as well as volatility and average return. In this case, you can see that our portfolio, so far this year, has delivered better returns, lower drawdown, and lower volatility. A perfect combination.
The model portfolio’s return is +4.84% YTD compared to +2.01% for the S&P500, and +70.85% versus +45.48% for the S&P500 since inception (September 2022). The model portfolio, as of Friday’s close, is as follows:
Now, let’s review the main developments among the companies in the model portfolio for the week:
InMode
The letter sent by DOMA Perpetual Capital Management LLC to InMode’s Board of Directors delivers sharp criticism and proposes strategic actions to reverse the company’s current trajectory, which has been in freefall for over a year. The underlying issue is clear: InMode’s market value is severely depressed, with a capitalization that seems laughable compared to the cash on its balance sheet. Management decisions, particularly by CEO Moshe Mizrahy, have led to significant shareholder mistrust.
DOMA highlights that the company is in a privileged financial position, with approximately $640M in cash, no debt, and the ability to generate around $150M in annual free cash flow. They identify the following problems:
Deficient Sales Management: The removal of key executives, including the Head of North American Sales, without appointing a replacement, has destabilized the commercial area, directly impacting sales—especially in a region accounting for more than 50% of the company’s revenue.
Lack of Diversification in Production: DOMA criticizes InMode for continuing to concentrate its production exclusively in Israel, a country facing significant geopolitical risks. They suggest diversifying to regions like the Dominican Republic or Costa Rica to reduce costs and mitigate risks.
Inefficiency in Cash Management: Accumulating large cash reserves without a clear strategy for effective allocation is viewed as a waste of shareholder capital. DOMA argues that this approach is not only unproductive but also undermines market confidence in the company’s management.
DOMA proposes the following solutions:
Restructure the Sales Team: Immediately appoint new Heads of Sales for key regions and provide quarterly updates on sales performance. This would restore investor confidence in the company’s operational capabilities.
Diversify Production: Move a significant portion of production outside Israel to reduce risks and costs, thereby strengthening the company’s operational resilience.
Massive Share Buyback: Conduct a 30% share buyback in Q1 2025, followed by an additional 10% buyback program during the year.
Introduce a Dividend: Implement an initial $15 million dividend in 2025, with moderate annual increases, to attract investors focused on recurring income.
Reduce Cash and Optimize the Balance Sheet: Lower cash reserves below $100 million and establish a credit line for emergencies, maximizing balance sheet efficiency and prioritizing shareholder returns.
The message is clear: if the Board does not take immediate action to correct the course, DOMA is prepared to take legal measures and exert pressure to protect its interests as one of the company’s main shareholders.
Amerigo
Amerigo Resources closed out an exceptional 2024, exceeding production and cost expectations by a wide margin. The company achieved a record production of 65 million pounds of delivered copper and 1.3 million pounds of molybdenum, comfortably surpassing guidance. Cost control was also remarkable, with a normalized cash cost of $1.87 per pound of copper—well below the forecast of $2.08—complemented by an average copper price of $4.15 per pound.
Financially, Amerigo ended the year with $35.9 million in cash, paying down $9.8 million in debt and returning $21.2 million to shareholders through dividends and share buybacks. For 2025, the company projects a production of 62.9 million pounds of copper, maintaining a conservative outlook with an estimated normalized cost of $1.93 per pound, reflecting inflation adjustments and higher energy costs. Despite this moderate projection, the company plans to close the year debt-free, which will free up approximately $7.5 million annually starting in 2026. This will further strengthen its ability to generate long-term value and return capital to shareholders. Since 2021, Amerigo has returned $78.1 million to shareholders and reduced outstanding shares by 11.9%.
With copper rebounding in recent weeks and anticipated stimulus from China in March following the Two Sessions, $ARG.TO could see a spectacular year, boasting a 10%+ yield and a 5%+ share buyback!
ICL
ICL has signed a joint venture agreement with Shenzhen Dynanonic Co., Ltd. to establish a lithium iron phosphate (LFP) cathode active material production plant in Europe, marking a strategic step in expanding its battery materials business. With an initial investment estimated at approximately €285 million, the facility will be located in Sallent, Spain, repurposing a former ICL potash production site and revitalizing around 25 hectares of land.
The project comes at a critical time for Europe, where the energy transition is driving increased adoption of sustainable technologies. LFP, with its ability to enhance the economic competitiveness of electric vehicles, plays a crucial role in this transformation. Projections suggest that LFP’s share in lithium-ion batteries in Europe could exceed 35% by 2030, underscoring its growing relevance in the sector.
The Sallent location not only ensures proximity to customers and planned LFP battery plants in Europe but also provides logistical advantages, such as rail access to the Port of Barcelona. This combination strengthens the plant’s competitiveness and aligns with the project’s sustainability and efficiency goals.
ICL will hold a majority stake of 80% in the plant. This is yet another example of how $ICL, beyond maintaining operational leverage tied to potash prices, consistently diversifies and enhances its business.
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.
