Welcome to the very first Kodiak Capital Advisors newsletter. In these monthly missives I will keep you up to date on the state of the firm as well as my thoughts on the markets in general and our portfolio in particular.
This month one ongoing macro event has dominated the discourse: the Russian invasion of Ukraine. We currently have a situation that is highly fluid and uncertain, misinformation is rampant on all sides, and the “fog of war” makes for a wide distribution of potential outcomes. In the near term, Russia’s overwhelming military advantages will likely lead to Putin’s core objective of regime change. However, given Ukraine’s current determination to resist long-term, the ultimate costs of Putin achieving those objectives remains uncertain.
From Europe’s perspective, this conflict raises near-term questions about energy prices, inflation, and growth. Further on, we should expect a significant increase in defense spending across the continent as leaders come to terms with this new geopolitical reality. This may also result in a revitalized and expanded NATO, probably first to Finland and Sweden and possibly further.
In the rest of the world, the impact remains to be seen. China sees Russia as a tributary, not a partner. Beijing does love to unsettle the U.S. and its allies, but Chinese leadership is much more interested in stability than Putin is so the likelihood of this situation affecting Taiwan is slim. The most important thing to remember is that humans don’t change and the great power struggles are never truly over.
In the markets, 2022 has been an ugly choppy year, with the tech selloff from 2021 continuing and several other sectors joining the decline. Currently, energy is the only sector with a positive return in 2022. In our portfolio, the best contributor to returns was Huntington Ingalls Industries, (HII) the defense shipbuilder. The biggest detractor from performance was Facebook, now known as Meta Platforms, (FB). The market did not like the y/y decelerating user growth (first in the company’s 18-year history), the large investment in the metaverse, or the lower profitability of reels and stories, the fastest growing part of the Facebook experience. I still believe, and more firmly now, that even given conservative forward projections, we own a stable and growing stream of cash at a very attractive valuation. We will continue to own it for the foreseeable future.
As an aside, I would appreciate any feedback on this project that you would be willing to give by filling out this poll HERE. As always, please contact me with any questions you may have. Thank you for trusting Kodiak to steward your wealth and help you build your legacy.
Kodiak Capital Advisors, LLC
These documents may contain certain statements that may be deemed forward‐looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. This newsletter should not be considered a solicitation to buy or an offer to sell a security.