Massif Capital, an investment management company, released its “Massif Capital Real Assets Strategy” fourth-quarter 2022 investor letter. A copy of the same can be downloaded here. In the fourth quarter, the strategy returned -1.14% net of fees and delivered a -5.8% return (net of fees) year to date. The fund generated a 6.55% return from the long book during the fourth quarter which was offset by a 7.49% decline from the short book. In addition, you can check the top 5 holdings of the fund to know its best picks in 2022.
Massif Capital highlighted stocks like Equinox Gold Corp. (NYSE:EQX) in its Q4 2022 investor letter. Headquartered in Vancouver, Canada, Equinox Gold Corp. (NYSE:EQX) engages in the exploration and development of mineral properties. On March 7, 2023, Equinox Gold Corp. (NYSE:EQX) stock closed at $3.5200 per share. One-month return of Equinox Gold Corp. (NYSE:EQX) was -16.59%, and its shares lost 55.16% of their value over the last 52 weeks. Equinox Gold Corp. (NYSE:EQX) has a market capitalization of $1.105 billion.
Massif Capital made the following comment about Equinox Gold Corp. (NYSE:EQX) in its Q4 2022 investor letter:
“Equinox Gold Corp. (NYSE:EQX) is a long-term holding we have written about several times. While maintaining our positive outlook, we sold the position in November to harvest tax losses. We have since re-established the position, but it warrants noting, as we had concerns about selling it and missing a possible surprise end-of-year move in the price of gold or a rush into gold miners by investors fearful of any number of things one could be afraid of at the moment.
Before we made the sale, we looked for a way to address the issue. We concluded that an effective way of handling this concern, which boils down to a concern for high volatility within the gold equity space, was buying call options on the GDX, where we found what we considered very cheap optionality. We purchased $35 calls on the GDX maturing in January of 2024, giving us, at the time of purchase, 13 months of control for $1.69 a share.
In essence, we established an options position that mimics the return of a roughly 6% notional position at a cash cost to the portfolio of just 17bps when the GDX is trading above $35 and responds well to volatility below $35 given the sensitivity of longer dated options to volatility. Whenever we have an opportunity to use similar non-recourse leverage, we always attempt to do so. Good returns will accrue from good ideas and figuring out the most effective instrument to express the idea. This is an excellent example of an alternative to straight equity allocation and a more efficient use of capital than if we had allocated 6% of the portfolio to GDX. We got lucky and bottom-ticked the purchase on the GDX 4th quarter local low. The position is up 221% for a modest 0.34bps portfolio-level gain. Given the optionality of controlling the shares, we intend to hold on to the options. We also re-established our Equinox position, only 2.9% off our exit price, and have benefited from a subsequent rally.”
Photo by Ricardo Gomez Angel on Unsplash
Equinox Gold Corp. (NYSE:EQX) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 13 hedge fund portfolios held Equinox Gold Corp. (NYSE:EQX) at the end of the fourth quarter which was 7 in the previous quarter.
We discussed Equinox Gold Corp. (NYSE:EQX) in another article and shared the list of best stocks to buy that are trading for less than $10 a share. In addition, please check out our hedge fund investor letters Q4 2022 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
