1. Hold em or fold em…
Portfolio holding Ampol reported this week that their QLD refining operations delivered the best quarterly profit in 4 years. We estimate around $70m profit in 3 months.
In early 2021, after a loss-making 2020, the Lytton refinery future was put under review with a shut down a real possibility. In the end, the Australian Government underwrote profitability at the bottom of the cycle and Ampol decided to keep the facility open. With the refining outlook improving, the move to stay open looks to be a benefit.
Source: Ampol, Firetrail
2. Did someone say supply chain issues?
Our bets are on that #supplychainissues is going to be trending through reporting season.
Delivery times for chips rose in December. The lead times, a closely watched gap between when a semiconductor is ordered and when it is delivered, increased by 6 days to about 25.8 weeks last month compared with November, according to research by Susquehanna Financial Group. That lag marks the longest wait time since the firm began tracking the data in 2017.
In China containers are piling up in Shenzhen again. Volumes into the terminal in January have been 30% above December levels, with an average 7-day delay for arriving ships. Full containers can only be trucked in 4 days before they are due for shipment; but shipments don’t appear to be going out according to Bloomberg. It’s no better in Los Angeles and Long Beach, as seen in the second chart below.
3. Netflix and chill no more…
Netflix guided to lower subscriber growth in Q1 this morning, and the stock was down 20%! Add it to the list of former pandemic winners that have been facing increasingly difficult growth expectations after a record setting year. It’s early in US reporting season to be drawing too many conclusions but Netflix’s stalling North American subscriber growth and aggressive price rises could be a reflection of the traction alternate streaming services are getting. Our Firetrail S3 Global Opportunities Fund holds AT&T, owner of HBO MAX, who could just be one of those beneficiaries.
While we’re in the US, we couldn’t miss the leaked internal document from Peleton saying they are going to temporarily halt production of their bikes as they continually reduce their view of demand – the stock got hit >20%. At least it was refreshing to not hear the blame laid on supply chain issues!
Source: Netflix shareholder letter