Event-Driven Strategies, Commodities, Writing Options With Asif Suria


From Vision Through Strategy And Execution To Success

IvelinRadkov

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Asif Suria talks focusing more on risk than reward with event-driven strategies (0:55). Market liquidity, commodity prices and portfolio ideas (5:40). Scaling back on tech; pre-mergers and rumored situations (10:55). Tracking SPACs on long and short side (14:00). Pfizer’s acquisition disconnect (20:05) Why bonds are really interesting right now (29:10).

Transcript

Rena Sherbill: Asif Suria, welcome to Seeking Alpha. Welcome to the Investing Experts Podcast. It’s great to talk to you. It’s great to have you on the show.

Asif Suria: Thank you for having me on, Rena. I’m very excited to be on.

RS: I’m excited to have you on. I’ve been reading your stuff on Seeking Alpha for quite some time. You haven’t written on there on the free side in a while. You also run an investing group called Inside Arbitrage.

You also have a book coming out called The Event-Driven Edge in Investing: Six Special Situation Strategies to Outperform the Market.

With all that said, Asif, how are you looking at the markets right now? How are you synthesizing your observations and what are you focused on?

AS: Yeah. So one of the things that happens, Rena, if you follow the markets long enough is you become acutely aware of risks. And as you get more experience, as you go through the school of hard knocks, you’re more aware and you’re thinking about the risk rather than just the return.

So the way I see the market right now, I find certain areas very interesting and exciting and have been excited about them for a while. I like commodities. I’ve been in copper and oil for a while, some exposure to gold. So it’s good to see that they’re making a nice little comeback right now.

The broader market I’m a little concerned about. I think, the S&P is trading at 27x trailing earnings. And so I scaled back a little bit on certain positions like Netflix (NFLX) and Meta (META) in recent weeks.

But that said, my focus usually is on event-driven strategies. So I look at merger arbitrage, which has, for the last couple of years, been a little bit of a challenging area because of heightened regulatory risks. But there are other strategies like spin-offs are making a nice little comeback right now. I like insider transactions as a way of generating new ideas that I might have otherwise missed. And we look at stock buybacks, we look at management changes.

So beyond what’s happening in the broader market, I like to kind of drill down into these strategies as a way to generate new ideas that I can then dive into deeper and see if it actually makes sense and could be a good fit for the portfolio.

RS: I’ve been listening to the past few Wall Street Breakfast podcasts and hearing a lot about mergers and takeovers, especially over the last few days, over the last week, to your point about the merger arbitrage, what kind of deals are you looking at now and how is that space filling up in the market?

AS: Yeah. So one of the deals I’m looking at right now is the acquisition of Capri (CPRI), which owns the brands Michael Kors, Versace, and Jimmy Choo, by Tapestry (TPR), which owns the brands Coach, Stuart Weitzman, and Kate Spade.

So these are two luxury brand companies that started out with just Michael Kors and Coach. And then they decided to buy other companies and become a multi-brand holding company, kind of like what LVMH (OTCPK:LVMHF) has done in Europe. And at some point, these companies kept competing with each other. They kept discounting their products. And it’s hard to say the word luxury and discount at the same time.

And so they were both hurt because of this discounting approach that they were taking and competing with each other. They decided to merge and the FTC has sued the companies to try and block the merger. The spread on the deal, when I was looking at it last night, was almost 61%, which means if you were to buy a Capri stock at, say, around $36 a share, and this deal actually closes by the end of the year, you get to make a little over 60% profit on the deal.

The reason it trades at such a large spread or profit potential is because of the regulatory risk of the FTC blocking the deal. At the end of the day, when you look at it, the FTC has defined their lawsuit as this is an affordable luxury handbag market. And these two companies merging would then limit competition, if you will.

But if you were to do a simple Google search or if you were to look at other brands, you’re going to find a whole lot of options in that range, say, a couple of hundred dollars to a thousand dollars for all kinds of handbags that you might be interested in.

So this is going to be an interesting one to watch. The reason I’m interested is not just because you have the upside potential of potentially over $20 if this deal closes. It’s also because Capri was trading at $34.60, somewhere close to that before the deal was announced. So the way I look at it, assuming fundamentals of the company don’t continue to deteriorate, the downside seems to be a little less compared to the potential upside on this deal.

RS: And speaking to your point about some concerns about the market and how you’ve seen some stocks pulling back and also your focus on the particular commodities that are copper, oil and gold, that interest certainly reflects that we’re in a certain place in the market or macro-wise, what’s coming down, the fact that copper, oil and gold are doing well.

How would you describe for investors how you’re thinking broadly speaking, and then trying to find the points of light, as you mentioned?

AS: Yeah. So we went through a process where we did a lot of stimulus. The stimulus continues in some sense through the Infrastructure Bill. And the impact of all this liquidity and money in the market is usually reflected in the rise of commodity prices. You did not see that with gold for a really long time because you had cryptocurrencies like Bitcoin that were the equivalent of digital gold, if you will.

But now it’s starting to catch up and you’re seeing commodities and real goods increase in price. At the personal level, at the retail level, you saw that in terms of inflation, and now you’re beginning to see it in terms of commodities.

Oil has been particularly fascinating because it’s been up in this $70 to $90 range for quite some time now. So an industry that was in deep recession before the cycle has been coming out of that recession it has been fascinating to watch the different parts of the industry continue to do well as this high crude oil prices continue.

So in the early stages of a rebound in oil, you often see that the production companies are doing well. Later on, you start seeing that the services companies are doing well. And then down the road, as the contracts reset, you start seeing the midstream, the pipeline companies that transport gas and oil start to do well.

So I’ve invested in different parts of that sector and most recently in a very large gas shipping company called, Dorian LPG (LPG), that is not only benefiting from this arbitrage in price difference between natural gas in the U.S. versus the rest of the world, but also from the fact that there are issues in the Panama Canal and the Suez Canal, which is increasing the amount of time it takes for ships to get to their destinations. And as a result, day rates have gone up quite a bit.

RS: And how are you thinking about in terms of playing the commodities? Are you looking, as you mentioned, at specific stocks? Do you look at ETFs? How would you encourage investors to think about that?

AS: So specific stocks is what I usually look at. So for copper, I have exposure to Freeport-McMoRan (FCX). For shipping, as I just mentioned, I have exposure to Dorian LPG. I also have a position in Diamondback Energy (FANG), which is one of the larger fracking companies. I had a position in Continental Resources, another large fracking company that its Founder, Harold Hamm, took private.

So there were a couple of opportunities there. You had an industry that was rebounding from its lows, and that’s the reason Harold Hamm was buying stock on the open market. And then eventually he tried to take the company private and he already held an 80% stake in the company and he made an offer and that was actually quite interesting because you knew that the minority shareholders, the other 20% would try to negotiate for a bigger deal, a higher price.

And that’s exactly what they did. And I think I wrote that up in Seeking Alpha Roundtable, I think, a couple of years ago. So I prefer to be in the producers, preferably the large producers, rather than the small ones or the ETFs.

RS: And how do you decide between the large producers?

AS: Well, you’ve got to look at multiple factors, right? You’ve got to look at their production costs. You also have to be keenly aware of geopolitical risks. So, for example, Freeport-McMoRan had some issues in both Indonesia and Chile.

And so you have to understand which countries is this company operating in, what kind of issues are they facing on the local front in those countries. You have to see if their production costs are increasing or declining. And then at the end of the day, because they are depleting the resource, you have to understand how well the exploration side of the business is finding new resources, if you will.

So it’s a mosaic of all these different factors you have to look at and each commodity is different. And the factors that go into looking into each of these commodities can be very different.

So back in the 2010s, I was an energy tourist and as an energy tourist, I got burnt because I didn’t know what I was doing. And that was a great experience. You can read a lot. You can read other people’s work. You can read books, including my book. But at the end of the day, unless you go through the process yourself, it’s hard to internalize some of these learnings.

So if you have a situation where you’re a tourist, you’re losing money because you don’t understand it. You can use that as an opportunity to day in, day out, make progress and understand the various aspects and factors that impact that industry.

RS: Yeah it is unfortunate that sometimes – most of the time – the only way we can really learn is to – is by making mistakes. I wish we could figure a way around that. So in terms of – you just mentioned how you can kind of assess things broadly speaking.

Anything that you want to say specific to any other sector that you’re looking at, be it, tech or another sector, how you’re strategizing around that sector?

AS: There aren’t specific sectors that I’m interested in. And tech, as I mentioned, I’m scaling back some resources, some exposure on that front. Beyond that is very broad-based.

So I’m looking at pre-merger or a rumored situation, such as Bally’s (BALY), which is based in Vegas. The casino operator, I’m looking at a micro-cap company that operates 16 centers, restaurants, which has bowling built into it. That’s an interesting company. I’m looking at an aircraft leasing company called AerCap (AER). And then I’m looking at a micro-cap bank that is going through a liquidation.

So I don’t specifically focus on a sector, if you will. It’s more about if any of my event-driven strategies surface an idea that I like, then I would explore it and get into it. Obviously, you want to understand if the industry that the company operates in is cyclical and which part of the cycle the industry is in.

Otherwise, you could look at trailing earnings metrics and think that you’re getting a great deal, but it might just be that the stock or the company is at a cyclical peak, and so it looks cheap in retrospect, but going forward, you might get burned.

RS: And how would you extend that to the tech sector? Why are you scaling back on it? I feel like there’s some mixed messages out of the tech sector. How are you parsing out fact from fiction there?

AS: So you had the situation where in late 2021, if you were looking at what was going on in terms of inflation, you said to yourself, it’s quite likely that the Fed is going to start increasing rates.

So in late 2021, I was trying to run a model, a DCF model. And one of the inputs of the DCF model is your discount rate. And if interest rates move up, you move up the discount rate. So what I did was I bumped up the discount rate on a few of my models by 1% or 2%. And I realized that especially for growth stocks that are not necessarily very profitable or have no profits at all, once you move up the discount rate, the valuation drops quite significantly.

And so that was an eye-opening exercise for me. And so I scaled back exposure at that point. And then you had the downturn of 2022 in tech stocks. And 2023 was a rebound from that downturn. So I ended up investing in Meta and Netflix during that downturn. So it was great entry points, if you will.

What I’m seeing now is normalization on that front. The opportunity is not quite as exciting as it was back then. These companies are doing very well. Don’t get me wrong. And I only scale back my exposure by about 25%. But they’re just not as attractive as they used to be, let’s say, even two years ago.

RS: Speaking to event-driven catalysts, and also learning the lessons that we need to learn, I’m curious what your thoughts are about the SPAC craze from a couple of years ago, how that market looks now and how you’re thinking about and how you’re seeing companies get to market these days.

AS: Yeah so with the SPAC craze, you saw an explosion of companies that were going public through a SPAC. Many of these companies were nothing more than what I call science projects. There wasn’t a real business attached to it. There were rosy projections about a very bright future that did not come to bear.

So what is interesting on the SPAC front, and I have a whole chapter in the book about them, is you had opportunities on both sides. So if you were to participate in the SPAC, you ended up with both units and warrants and you could keep the warrants. And when there was the shareholder vote on whether you approved the business combination with an operating business or not, you could vote no and take your money back while retaining the warrants.

So that was an interesting arbitrage situation, if you will, with SPACs. What got really interesting with them was people started looking at this group of SPACs as companies that were potential short opportunities. So it was companies which had no reason or no status to go public and they ended up going public.

So a lot of people on the short side were looking at these as opportunities. Shorting is extremely difficult. It can take a really long time, and you can get burnt shorting because the maximum gain could be 100% and the maximum loss could be unlimited if the stock really does what GameStop (GME) did or (AMC) did during the meme stock rally.

So it was interesting to track the SPACs on both sides. I was short a SPAC, WeWork (OTC:WEWKQ), when I looked at its balance sheet and I felt like there was almost no way this company was going to be able to make money given the amount of debt that was on the balance sheet. But I’ve also been on the long side.

So right now, there is a SPAC that recently merged with an operating company. So Screaming Eagle is a SPAC where the CEO is the ex-CEO of (MGM). And they merged with the studios and library division of Lionsgate Entertainment (LION). And so in this situation Lionsgate was spinning off one part of the company what I perceived to be the most attractive part of the company, and then merging it into the SPAC.

So this is a very different kind of situation. The SPAC did not go look for an operating company, they essentially merging with a division of Lionsgate Entertainment.

So there are three things that are interesting beyond the fact that MGM’s ex-CEO is at the Head of the SPAC. The management team – the main management team of Lionsgate is moving to the spin-off that is merging with the SPAC. And as I mentioned, the library, which at one point was generating almost $1 billion in revenue and the studios division that is behind franchises like John Wick, The Hunger Games and so on and so forth is also going to the SPAC.

So that can be unique situations where you look at a SPAC and you say, this is really interesting. It’s something I would like to explore. And there might be a situation where you look at a vast majority of them and say, hey, these might be great, short opportunities instead of something on the long side.

RS: In terms of discussing either how companies get to market or how they merge or how one is taken over, would you say that there’s something that investors or analysts tend to get wrong about looking at those situations? Or there’s something that we should be keeping in mind?

AS: Yeah. On the merger front, so each of these are different. On the merger front, there has been academic research to show that companies that go through very large mergers don’t end up doing well. And there’s multiple reasons for this. You could end up with a highly leveraged balance sheet because you did multiple mergers at high multiples. You could end up with a situation where the integration issues might be significant and might be long lasting. And expected synergies, as you will – if you will, don’t really materialize.

So you see, look at companies like (CVS) that went through an acquisition binge, or you look at, more importantly, Pfizer (PFE), which used all its pandemic-related money it made on the vaccines, go out and buy a bunch of different pre-clinical stage companies. And you notice that these companies get burdened with all the debt.

So when you look at mergers, it’s important to recognize if this is a strategic merger, if this is a tuck-in merger, or if this is a large merger that’s going to really impact the parent companies’ prospects over the next few years.

So there’s the merger arbitrage component of it, where, for example, Microsoft (MSFT) was acquiring Activision Blizzard. The deal was at about $95 a share, and Activision was trading at $75 a share. So you had the merger arbitrage opportunity of $20 of upside, potentially $10 downside if the deal broke. But beyond that, what does that say about Microsoft, that deal I thought was very accretive.

It was positioned so that Microsoft would then have a stake, if you will, in the virtual world that Zuckerberg was trying to build with Meta. So that was one part of it. Activision Blizzard had also come down a lot because of the sexual harassment lawsuits and so on and so forth. So that was an excellent acquisition at a great price.

So you’ve got to look at these situations on a one-on-one basis and say, is CVS making a mistake here as it’s looking to build this vertically integrated model where it has clinics on one end, the pharmacy in the middle, and it has the insurance company at the top end, or are they just overpaying for assets as they try to realize that dream.

RS: So speaking of solving for human fallibility, let’s take Pfizer as an example. What would you attribute, let’s call it mistaken acquisitions or not the best acquisitions, what would you, I mean, I know that they had money that they could spend. Is it as basic as that? Why do you think that they made all those acquisitions?

AS: In the case of Pfizer, I think, there’s a little bit of a disconnect between what the company did and the way the market is perceiving it. I think they did the exact right thing. They had a lot of cash from the pandemic. They could have done buybacks or they could have done special dividends.

The stock was at an elevated level because of all the money that had come in, and doing buybacks at that time is actually the exact opposite of what you should be doing.

And so I think they made several really good acquisitions. They acquired Trillium in 2021, they acquired Arena in 2021 as well, then they acquired Biohaven, at least a part of Biohaven in 2022, and then they had Global Blood Therapeutics, all of which was great, especially the Biohaven acquisition was a fascinating situation because you had a situation where there was merger arbitrage, there was a spin-off, there was insider buying, all kinds of things going on.

I liked all of those acquisitions, but I felt like they really paid up for their Seagen acquisition, which was $43 billion. So I think they followed a strategy that made a lot of sense, but that last acquisition they did was so large, that the market started getting concerned about the debt Pfizer was incurring by taking on such a large acquisition.

RS: Do you think that they got ahead of their skis? They just got excited on a string of acquisitions? Why do you think they paid so much?

AS: They like the strategy because they were buying companies that had products either in Phase 3 trials or just before it became – they were able to start selling products.

So it made sense these small companies needed larger companies like Pfizer for their marketing and distribution, which is one of the reasons the FTC or the DoJ doesn’t look at most of these deals and they end up going through.

But I think the strategy that works, if you take it too far, as you mentioned, can get you ahead of your skis. And I think some of that might have happened with Seagen. You have deep relationships with investment bankers and they are excellent at selling you things and it’s possible that they just got ahead of Pfizer on this one.

RS: Fair enough. So in terms of investing in Pfizer, were you, as an investor, bullish, bullish, bullish, no, neutral/bearish?

AS: I’ve actually been bullish. It’s an amazing yield. You get about 6% on it. And I think that the pipeline that they built is very strong, which is where I think the opportunity lies. There is a disconnect between the way the market is looking at it and the way the company is performing.

So I think there’s a lot of potential going forward. But this disconnect that we’re seeing, which saw the stock drop more than 30% in a short period of time is where you need to pay attention saying, hey, is this company doing very large deals?

And even though in the long run they’re going to do fine, what does this mean in the interim term? What’s going to happen over the next one to three years? And maybe I can get an opportunity to buy this at a lower price, or maybe I should scale back on my position until things settle down, if you will.

RS: I appreciate that. And would you elucidate for investors why doing a buyback at that time is generally the wrong thing to do in Pfizer’s case and in general?

AS: Yeah, absolutely. So if you go back to the crisis back in 2007 to 2009, The Great Recession that we had, you had banks like Citigroup (C) that made large buybacks right before that crisis hit. If you look at cyclical industries, you will notice that just at the top of the cycle, as money is flowing in, these companies are cash-rich, they go ahead and start doing buybacks because they don’t know where to put that capital to work.

And then the cycle turns and just like you saw with Citigroup, they end up needing cash and they end up either diluting shareholders or the government has to bail them out and things like that happen. So it seems like it’s very difficult for some management teams to just sit and hold on to that cash when times are more favorable and deploy it then.

Capital allocation as William Thorndike’s book, The Outsiders, discusses is a very important component of how well a company does. And often you see that with badly timed buybacks, the capital allocation is not where you want it to be.

So whether it’s cyclical companies, whether it’s a company like Citigroup, buying at the top of the cycle, doing large buybacks is a mistake. And I’m glad that Pfizer did not go through with that. There are companies like tech companies, you’ll see massive buybacks announced by Apple (AAPL), Google (GOOG) (GOOGL), and other tech companies. But some of that is just being done to offset the dilution from stock-based compensation that they offer to the employees.

So you’ve got to look at the buyback announcements, and then you’ve got to match that with what’s happening to actual shares outstanding from the 10-Ks and the 10-Qs. Are you seeing a reduction in the shares outstanding? Or are they mostly just announcing these buybacks and either not following through with them, or they’re following through with them to offset the dilution from stock-based compensation.

RS: Appreciate that. I guess fresh off the heels of some heavy lifting in terms of sharing for investors, how things should work, how they do work, how we should think about them working, I’m curious – this is kind of like maybe a three-pronged question.

I’m curious why you’re not writing as much for Seeking Alpha, what you’re focused on in your investing group and why you decided to write your recent book.

AS: Oh, so the book was interesting. It came – it was – people asked me how long it take – it took me to write this book. The short answer was it took three months to write the book. And it was a six-month editorial process back and forth with Harriman House. But the long answer, it took me 19 years to write this.

I reached out to David Jackson at Seeking Alpha in its early days in 2005 and I sent him a couple of articles. And I said, hey David, are you interested in republishing this article that I wrote about an Indian automobile manufacturer? And he said, yeah, that’s great. And that started my journey of writing in public.

So a lot of what I learned from that journey, writing over 19 years and the different experiences in the case studies found its way into the book. The book came about because it was one of those things I wanted to do on my bucket list. I got a chance to go to Omaha and watch Warren Buffett and Charlie Munger a couple of years ago. I went again this year. And so that was another thing on my bucket list.

And I got really warm introductions from a couple of popular authors to Harriman House and it worked out. They asked me why I wanted to write this book. And I said that the last book that is really significant in this space was Joel Greenblatt’s, You Can Be a Stock Market Genius. And it had been almost 25 years since that book was written, at least, when I was talking to Harriman House.

And they said, yeah, that makes sense. And I said, there are several changes, if you will, to event-driven strategies since then and there are new case studies. So I ended up finding 12 case studies that I could cover in the book, two per strategy, one where the strategy worked as expected, and one where the strategy didn’t quite work out.

So that was the impetus for the book. It was a bucket list thing. I had a bunch of case studies that I wanted to share, and it had been a while since my favorite book, You Can Be a Stock Market Genius had come out. So I decided to do it for that reason.

I have been publishing very consistently on the paid side of Seeking Alpha, the Inside Arbitrage service, and I’ve been publishing on my website as well. I’ve just scaled back a little bit on the free content because I’ve been doing some other things, including starting to manage money for some clients here in California last year.

RS: A lot going on. I think it was the author, Henry Miller, I believe it was him. He didn’t start writing books until a bit later in life. And somebody said, why didn’t you write earlier. And he said, I’ve been pregnant with this prose my whole life and it’s just a matter of getting it out. So I like that. Writing a book is no small chore. So the fact that you got that in six months is extremely impressive.

Asif, what else are you looking at in the markets? Anything – any other sectors, bonds, what else would you be interested in talking to investors about, or reshaping maybe how they’re looking at something?

AS: Yeah. So bonds are really interesting, right? You had the situation where because of rising interest rates, you had a big decline in bonds. And now you’re likely to start seeing the reverse of that.

I remember another one of your guests was talking about (TLT), the Treasury ETF. He looks at it all day long. I thought that was quite interesting. And so TLT is interesting because you have this 20-year treasury bond ETF.

And a friend of mine who’s really good at generating yield from all kinds of instruments, him and I could be looking at the same idea and he’ll come up with a better instrument or a better strategy for the exact same idea. So I’m going to attribute this idea to him.

He was looking at TLT and he said, you know what, you pick up nearly 4.5% of yield on TLT. But if you look at it and you write covered options on top of it, expiring a year out, you pick up another 5.5%, 6%. And so this was fascinating. You could end up with a potential 10% yield on a bond ETF by combining covered calls and the interest payments that you get.

And if interest rates stay the same or they go down, the whole thing plays out well, the options expire and you can write new ones next year. The biggest risk is if interest rates go up, and while most people thought we would get multiple interest rate cuts this year, those predictions haven’t quite come true.

And now we’re talking about maybe one or two interest rate cuts by the end of the year. But that’s still – the conversation is still about interest rate cuts. There isn’t that much discussion about interest rates going up.

So I thought this was a fascinating structure, if you will, where your Treasury bond ETF is combined with covered calls on the ETF. Again, nothing in this is investment advice. Everybody should look at the risks themselves, talk to their investment advisor before taking any actions.

RS: Are options something you use fairly often?

AS: I do, but I do it in a slightly different way because I’ve realized that I can count on one hand, the number of people I know who have actually made money doing options. And over a long period of time, I ended up being on the other side where I prefer writing options.

So, for example, with TLT, I wrote covered calls on it. With Dorian LPG, the shipping company, I also ended up writing out of the money covered calls on it. So Dorian LPG has a $1 a quarter irregular dividend, as they call it, where the yield was almost 9.5%, 10% when I bought it. And then I was able to juice that yield by writing covered calls for that company. So on the one side, I do covered call writing on existing positions.

And then on the other side, if it’s a company that I’m very interested in buying, so for example, let’s say, Crocs (CROX), I might write cash secured puts, so that if the stock hits a price at which I sold the puts, I’m willing to buy it.

RS: Asif, anything else you want to discuss with investors or share with investors? Anything that you feel like we left out of the conversation?

AS: No, I think we covered a lot of ground. It’s just that all six strategies that I usually discuss are not created equal. You wish that you love your kids equally, but different parents approach it differently. Some are very good at loving them equally, some are not.

And so with the strategies, you don’t have to pigeonhole yourself into any one style or strategy, if you will. There are times in market cycle where value investing works great coming out of a recession or a bear market. There are times in the market cycle where growth investing works good. There are times when merger arbitrage is an excellent strategy and an alternative to investing in bonds and there are times when spin-offs work really well.

So I really like the flexibility of having multiple mental models, multiple strategies where you can be nimble and move between the strategies based on what’s working in that part of the market cycle, rather than just sticking to the one thing that you know that might not work for a few years, if you will.

RS: I think something I’ve learned from talking to so many smart, experienced people such as yourselves is, if I may extend the analogy you used, even for your favorite child, they don’t belong in every single situation. The best thing to do is know how to be nimble and savvy. Would you agree?

AS: That’s exactly right. Each investment, each industry, each country has its time and you have to recognize that.

RS: Yeah. The other thing actually I wanted to ask you before we cut out. And I do hope you’ll come on again, Asif. I enjoyed meeting you. I enjoyed talking to you. I’ve been reading you for a long time. It’s nice to put a face to the thoughts.

Any thoughts on the international picture? You mentioned geopolitics at the beginning of this conversation, obviously, anyone looking at news or the world is noticing that. Anything to say there internationally?

AS: Yeah. So obviously, we have two unfortunate wars that are going on in two different parts of the world. And you always have these conflicts, geopolitical tensions, something that investors are always worried about.

In the context of your investments, it really depends. Is it an international company like Freeport-McMoRan with operations in different countries where you need to be worried about it. That could have an impact.

Is it Dorian LPG, which actually is seeing higher day rates because of some of these issues, whether it’s the drought on the Panama Canal or whether it’s the Houthis attacking the Suez Canal. So those are two situations where you could have a positive or a negative outcome because of what’s happening.

And then you have the country specific things. China was a favored child for a very long time and now it is India. So China fell out of favor and is making a nice comeback this year, just as Japan did after maybe two or three decades.

So, you got to look at things. I find countries like South Korea and Vietnam particularly attractive at this point compared to the U.S. You see that they’re growing and the market is relatively cheap compared to the U.S.

But while you get excited about Japanese stocks or Chinese stocks, you also have to pay really close attention to the foreign currency risks. So while Japanese stocks did very well, once you adjusted for the foreign currency risk, the returns weren’t quite as juicy as they appeared.

So you have to look internationally to understand what’s going on, either specifically as it ties to your company that you’re analyzing or broadly as a country to see is the country doing well and is it potentially at a much cheaper multiple than you would find in the U.S.

RS: And do you get into specific stocks here or ETFs?

AS: On the country specific level, I do use ETFs. There might be a stock every now and then that I might end up buying. And if it’s a country where I’m not worried about risk to the American Depositary Shares or ADS, then I might use an ADS to get exposure.

RS: And do you do currency ETFs as well?

AS: I don’t, that’s a whole different area that I don’t think I’ll have time for in this lifetime.

RS: Because it just takes so much specific expertise and kind of negotiating between countries and a lot of moving parts?

AS: There’s a lot of moving parts. I have my hands full with six strategies at this point and one country. Someday if I can get out of this rabbit hole and look at it, I just don’t think I have any edge in trying to understand which way currencies move. And so that’s an area I tend to stay out of.

RS: Yeah. Know when to stay in your lane. Important advice on the back of so much important advice.

Asif, I really appreciate the conversation. I’m looking forward to the next one. Thanks for taking the time today.

AS: Thank you for having me on, Rena. This was a lot of fun.

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