Trump went to a UFC fight

“You know, Trump went to a UFC fight with the head of the Saudi Arabian Public Investment Fund. They are going to cut off Iran’s oil exports…oil could be a hot space this year.”

The speaker was a confident young man who, normally, looks for things that are cheap, hated, and moving higher.

His team rarely dips a toe into commodities.

I attended an NFL football game on Sunday with a group of financial experts.

There were four analysts and a high-net worth financial advisor. We were in a suite, hosted by “The Reclusive Millionaire” of internet ad fame.

As you can imagine, the conversation moved to the coming year’s strategies.

The host said that he doesn’t expect tariffs to be anything more than saber rattling. I was interested in the tone of the group. There was no fear. None.

These folks are usually cautious. While not conservative, they do take a cautious approach to the market. And yesterday, that was absent.

There was almost a euphoria around the market…as you can infer from the idea of making an investment on oil, based on the president elect’s neighbor at a UFC fight.

And the market reflects that same sentiment today. It’s up over 68% in just over 2 years. That’s a phenomenal return…

And I believe it’s unsustainable. But I was the only person in the group that expressed any fear of a potential bear market.

We are so concerned, at Mangrove Investor, that we folded one of our services. We believe there could be a significant decline in the next 12 to 18 months. Here’s why…

The stock market breaks out like this:

• Technology: $12.0 trillion
• Consumer Discretionary: $7.4 trillion
• Healthcare: $6.7 trillion
• Financials: 5.8 trillion
• Communication Services: $5.4 trillion

^{Data from Perplexity.ai}

The top sectors, technology, and consumer discretionary, are exposed to tariffs on imports.

Unfortunately, according to industry trade group Consumer Technology Association (CTA), the tariffs would cut consumers’ spending power by $90 billion on products including TVs, headphones, laptops and tablets, video game consoles, smartphones, and other electronics.

That’s important because it hits higher up the financial ladder than the high cost of food.

When butter, milk, eggs, and cereal prices skyrocketed, those prices hit the lowest among us – fixed income and minimum wage earners. That’s not a demographic that impact the stock market.

However, when the price of consumer goods soar, that’s a different story. According to CTA, the cost of a laptops or new tablet could soar by up to 45%. The cost of video game consoles like Microsoft’s Xbox and new cell phones could rise by double digits.

That impacts a different kind of consumer…one that can affect the stock market.

The other critical factor today is debt. The nation’s consumers spent nearly $2.5 trillion in pandemic era savings over the past two and a half years, according to the Federal Reserve Bank of San Francisco. Now the U.S. consumer is underwater:

We believe the increase in both prices and debt will impact spending in 2025. As consumers become more reluctant to buy, it will have an impact on earnings across the board.

We believe this could be the catalyst for a significant pull back in the general stock market.

Action to Take

With that in mind, here is a list of our recommendations for all the current portfolio positions:

• Aclara Resources (TSX: ARA) – Maintain a 30% trailing stop on this position. It’s highest price since we bought was $0.57 per share. That means we will sell if this stock falls below $0.40 per share. It’s currently $0.41 on the TSX, so it could trigger soon.
• Alphamin Resources (TSXV: AFM) – Maintain a 30% trailing stop on this position. Its highest price since we bought was $1.25 per share. We will close this position if its share price falls below $0.88 per share.
• Altius Renewable Royalties (OTC: ATRWF) – Begin a 20% hard stop on this position. That means if it closes below $6.76 per share, we’ll sell.
• BQE Water Inc. (TSXV: BQE) – maintain a 30% trailing stop on this position. If shares close below $42, we will sell.
• Brookfield Renewable Partners (NYSE: BEP) – Sell Brookfield Renewable Partners. We generated $3.06 in dividends but lost $9.77 in share value. We will take a 19% loss on the trade.
• BWX Technologies (NYSE: BWXT) – Maintain a 30% trailing stop on this position. However, we believe this company will be resilient in the face of tariffs due to its unique position in the market.
• Canadian Premier Sand (TSXV: CPS) – Begin a 30% trailing stop on this position. However, we believe a North American supply of solar glass, even subject to Canadian tariffs, should be robust in the next few years.
• Capstone Copper (TSX: CS) – Sell half of this position. If we sell half of this position, we will lock in a 117% gain and exposed to further upside if the stock continues to rise.
• Filo Corp. (TSX: FIL) – Sell this position. We will lock in a 57.5% gain on our successful copper miner.
• Genie Energy (NYSE: GNE) – Sell this position. We earned $0.60 in dividends and are up 49% on the position. Take the profit.
• Hawaiian Electric Industries (NYSE: HE) – Sell this position. We will take a 25% loss on our investment.
• Ivanhoe Electric (NYSE: IE) – Begin a 30% trailing stop on this position. If shares close below $6.65 we will sell.
• Largo Inc. (Nasdaq: LGO) – Begin a 30% trailing stop on this position. If shares close below $1.47 we will sell.
• Lundin Mining Corp. (TSX: LUN) – Begin a 30% trailing stop on this position. If shares close below $9.62 we will sell.
• NexGen Energy (NYSE: NXE) – Sell this position. We will lock in an 80% gain on our successful uranium miner.
• Rayonier Advanced Materials Inc. (Nasdaq: RYAM) – Sell half of this position. We will lock in a 53% gain on this unique U.S. material maker. And we will be exposed to further upside if the stock continues to rise.
• Skyharbour Resources Ltd. (TSXV: SYH) – Sell this position. We will lock in a 4.7% gain on this speculative uranium explorer.
• Sprott Junior Uranium Miners ETF (Nasdaq: URNJ) – Sell this position. We will lock in a 3.4% gain on this sector fund.
• Sprott Physical Uranium Trust Fund (TSX: U-UN) – Sell this position. We will lock in a solid 50% gain on this commodity focused fund.
• Standard Lithium (Nasdaq: SLI): Begin a 20% trailing stop on this position. If shares close below $1.42, we will sell.
• TOYO Co. (Nasdaq: TOYO) – Begin a 20% trailing stop on this position. If shares close below $3.36, we will sell.

As you can see, we took some defensive positions. However, several of these companies should be robust in the face of tariffs. The concern we have is that a market crash will take these companies down with the greater market. A selloff will hit everyone.

That’s why we recommend taking some profits here. We did quite well, but the profits are not real until you sell.

We hope that our outlook proves completely wrong. But we are concerned enough to take precautions. We hope we’ve persuaded you to do so as well.

For the Good,

The Mangrove Investor Team