Sturgeon Capital is working on a “listed investment vehicle”


Metals and commodities have taken an upward turn this year, and several funds are capitalizing on these moves. Silk Road-focused Sturgeon Capital was already enjoying gains from its positions in copper and a number of mining companies, and in February the fund increased its holdings in the sector. Copper in particular has turned heads this year, and Sturgeon is no exception.

If things continue as they are, this could be a good move for Sturgeon, based on the high 29% return posted by Regal Capital’s Atlantic Absolute Return fund, which was pulled down by mining and resource stocks on last month.

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Kazakhstan, oil and copper were the big winners

Sturgeon Capital rose 1.05% in February, thanks to developments in Kazakhstan and mining stocks. February’s gain follows a 7.2% gain in January. The Kazakh index climbed 6.23% in February, significantly outperforming the rest of the fund’s coverage area. The MSCI Russia index rose 0.75% and the MSCI Turkey index slipped 0.16%. The MSCI Frontier Markets index gained 2.92%.

On the currency side, the Kazakh tenge gained 0.83% in February, while the Russian ruble was up 0.93% and the Georgian lari remained broadly stable. Copper prices rose 7.75% in February and Brent oil rose 8.89%. Gold prices rose 1.85% in February.

In their February report, which was reviewed by ValueWalk, Sturgeon’s team said constructive negotiations on the U.S.-China trade war had heightened sentiment. The US Federal Reserve confirmed its accommodative stance, which also helped. The Chinese authorities have also contributed to market sentiment with further stimulus measures designed to soften the deceleration in their economy. As a result of these factors, stocks in commodities and emerging markets outperformed in February.

Settle in Uzbekistan

The Sturgeon Capital team is working on a “listed investment vehicle” designed to exploit the opportunities of the Uzbek market. The nation issued its first Eurobond with an indicative yield of 4.75% for the five-year issue and 5.375% for the 10-year bond. Sturgeon organized a trip to Uzbekistan in February to meet with a number of companies and highlight the major changes that are underway there right now.

“Uzbekistan is one of the few countries to take advantage of its ‘moment of the fall of the Berlin Wall’ and Tashkent is in turmoil,” said the management of the fund. “However, as the capital markets and financial sector are still nascent, the lack of financing keeps asset prices low. Valuations are undemanding despite high growth rates, limited competition and talented management.”

Addition to mining and metals

The Sturgeon Capital team increased its allocations to metals and mining in February due to strong performance in commodities, particularly copper. The Fed’s decision to halt interest rate hikes and shrink its balance sheet is expected to lower the value of the dollar, in turn boosting commodities and other risky assets.

The fund took advantage of the recent Turkish rebound to reduce its allocation. Management expects some weakness in the Turkish lira around the March 30 elections. They also reduced their Kazakh allocation by “reducing an illiquid stock with little upside potential.”

The fund’s best performing positions were Turquoise Hill Resources, Halyk Bank and Kaz Minerals. Kaz released strong profit figures for fiscal 2018, including copper production figures that were at the high end of their forecast.

Sturgeon’s worst performing positions were DP Eurasia, Georgia Healthcare Group and Georgia Mining. Georgia Healthcare reported strong results with strong revenue and EBITDA gains. After a heavy cycle of investments, the company continues to gain market share and increase the occupancy rates of its hospitals.

The fund’s main holdings in February were Liberty Bank, TCS Group, Halyk Savings Bank, Kaz Minerals, Centerra Gold, TBC Bank, KazTransOil, Turquoise Hill Resources, Ros Agro and Yandex.

This article first appeared on ValueWalk Premium



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