7/10/2026
The Hormuz Shutdown Deficit and Gold’s New $4,500 Range
Happy Friday!
In this week’s letters,
– Ninepoint on oil, energy, and gold
– Donville Kent Asset Management on the two sides of AI
– Troy Asset Management on the concerns related to AI
– Elevator pitches for SRL, BFH, and EZJ LN
Quarter in progress: 67 fund letters of 2026 Q2 are live on our database!
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Q2 2026 INVESTOR LETTER SUMMARIES
- The closure of the Strait of Hormuz has removed nearly 13–14 million barrels a day of oil supply, resulting in a significant drawdown of global oil inventories. Even after accounting for offsets such as Strategic Petroleum Reserve (SPR) releases and Emirati workarounds, the net loss remains roughly 5.7 million barrels per day (bpd), a deficit that current inventory levels cannot sustain indefinitely.
- The conflict in the Middle East has, once again, highlighted the strategic importance of energy independence and solidified the ongoing trends of nuclear buildouts and growing demand for uranium. As countries seek to secure a reliable energy supply for national security and data centre needs, while simultaneously addressing carbon reduction commitments, nuclear energy stands out as an increasingly viable and attractive solution. This trend, in our view, will continue for decades and may provide investors with significant opportunities.
- Despite a more hawkish tone from the Federal Reserve and a period of dollar strength, gold has established a new trading range around $4,500, and investors are likely looking for some price stability. We continue to believe that gold is in a multi-year bull cycle, and we view the current pullback as a buying opportunity. The long-term fundamentals remain highly compelling as the industry prepares for the next leg of this significant market cycle.
Donville Kent Asset Management
- We are currently finding a great growth-to-value trade-off in small-cap stocks. The S&P 600, which represents profitable small-cap companies, is trading at its greatest negative spread relative to large-cap stocks. After each of these extremes in the past, there has been a strong trend reversal.
- There are currently two opposing arguments about AI. One argument is that AI is overhyped and will not have as significant an impact as people expect. The other is that AI will become so powerful and influential that the survival of most companies, and even many jobs, will be threatened.The first group points to the lack of real-world evidence that this transformation is already taking place. The other group believes that the world is still in the early stages of a massive exponential adoption cycle.
- A final point on AI is that it does appear to be increasing the formation of new businesses. There are two sides to this development. We need to keep our eyes open for emerging companies and potential investment opportunities while also monitoring new businesses that may disrupt existing companies.
- Our doubts about the durability of returns stem from several interrelated concerns.The first concern is the cyclicality of semiconductors and the inevitability of capital cycles. The semiconductor sector has always been highly cyclical, yet the consensus assumes that this time is different and that outstanding secular growth at high margins will persist for years.
- The second concern is the fragile economics further down the chain. Behind the cash-rich hyperscalers, the picture is more precarious. The neoclouds—CoreWeave, Nebius, Crusoe, Lambda, and others—are highly indebted entities with aggressive expansion plans and are set to grow from roughly 10% of hyperscaler capacity in 2025 to 30–40% in the coming years.
- The third concern is that supply and demand may be less imbalanced than they appear. Every hyperscaler currently reports that demand exceeds supply, and we do not doubt their individual positions. However, in aggregate, we may be closer to equilibrium than their statements imply.
ELEVATOR PITCHES BY FUNDS
Scully Royalty (by Kingdom Capital)
- We began building a position in Scully Royalty (SRL) earlier this year after an activist group took over management.
- The stock was subsequently halted indefinitely in May, temporarily limiting liquidity. If ongoing litigation is resolved, we expect trading to eventually resume, and we estimate the fair value of Scully’s royalty interest is multiple times the price at which the stock was halted.
- The position currently creates an approximately 2.5% headwind to reported Q2 results. This represents a classic special situation where temporary market dysfunction and forced selling create opportunity for patient capital.
Bread Financial Holdings (by Turtle Creek)
- After dropping below $25 three years ago, today it sits north of $100. It too had suffered profound multiple compression in the years prior.
- Management continued to run the business as usual, growing earnings, while at the same time taking advantage of very attractive share prices to retire over 30% of their equity capital.
- In all of these cases, the substantial price increases were a combination of a rebound in traded multiples and growth in earnings, magnified by a lower share count – all of these companies were active repurchasers when their share prices were in the doldrums.
easyJet (by Oldfield Partners)
- The company had the takeover approach from Castlelake, a US investment firm. Castlelake has raised its proposal repeatedly to 650p, valuing the airline at close to £5bn. The board has rejected each bid as opportunistic, arguing that they exploit a share price temporarily depressed by Middle East-related weakness and fundamentally undervalue the company. We agree.
- The approach vindicates our own view that the market had been mispricing the business: a very attractive set of assets, particularly its slot portfolio and fleet.
- We are encouraged that the board is holding out for full value.
HIGHLIGHT OF THIS WEEK
MEDIA APPEARANCES BY BSDs
- Elon Musk says AI will create such abundance that governments will provide for all, and work will become a choice. Michael Burry says it’ll be a rocky road to get there.
- “AI+Robots will be able to do everything, resulting in universal high income,” Musk posted recently on X. “Work will be optional.” “False,” Burry replied. “There will be revolution first.
Son remakes SoftBank in his own image
- Last month in central Tokyo, Masayoshi Son stood on stage in front of a screen showing a goose producing a series of golden eggs from a Fritz Lang-inspired factory in its stomach.
- One slide read: “Eggs do not lay eggs”. Another: “What matters is not the eggs. It is the Goose itself”.
How BlueCrest’s Michael Platt fell foul of the UK taxman
- Hedge fund manager Michael Platt is used to winning. His appetite for risk and ability to take outsized bets has helped make him one of the industry’s most successful traders and among the UK’s richest people.
- But a high-stakes battle against the country’s tax authorities has ended in defeat after the UK Supreme Court this week dismissed an appeal by his family office BlueCrest Capital Management that could cost it £200mn.
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