At a Glance
Primary focus
Companies deriving the majority of revenue from the production, extraction, processing, distribution, or manufacturing of physical mass (industrial materials, metals, commodities) and energy (resources, power generation, infrastructure)
Role in portfolio
Stability foundation, inflation hedge & physical value anchor
Typical weighting
15–40%
Risk/return profile
Defensive with cyclical growth potential / moderate volatility
Key characteristics
Physical resource-heavy operations, commodity/energy-linked revenues, intrinsic real-world backing (mass & energy as conserved fundamentals)
How This Segment Adds Value
- Strong inflation protection Physical commodities and energy prices historically rise with inflation, preserving purchasing power
- Currency devaluation hedge Holdings tied to globally priced physical resources that retain intrinsic value independent of fiat currencies
- Future currency alignment Positions the portfolio for an abundance-driven economy where mass (tonnage) and energy (wattage) become the primary measures of real value
- Portfolio ballast Low correlation to digital/technology growth stocks; provides resilience during volatility driven by monetary policy or tech cycles
- Valuation discipline Often trades at attractive multiples during commodity downturns, offering compelling entry points into essential physical assets
Selection and Construction
- Macro trend overlay Top-down analysis of global macro trends: Commodity and energy price cycles, electrification/infrastructure demand, physical resource constraints (mass & energy scarcity/abundance dynamics), geopolitical supply shifts, and secular drivers like AI power needs – used to identify high-conviction themes and opportunity sets
- Qualitative filters Primary driver – active stock picking skill: Rigorous bottom-up fundamental analysis assessing management execution, operational efficiency, quality and durability of physical assets/reserves, geopolitical positioning, sustainability of operations, and long-term competitive advantages in mass & energy production
- Position sizing Concentrated yet diversified: 8–15 high-conviction holdings, individual position limits 3–8% to balance conviction with risk control
- Rebalancing triggers Fundamentally driven: Significant commodity/energy price cycles, material company-specific developments (asset quality changes, leverage shifts, operational milestones), or evolving secular demand trends in physical infrastructure
Why It Matters
- Preservation of real capital Critical in environments of persistent inflation or monetary debasement
- Diversification benefit Reduces portfolio drawdowns during equity bear markets driven by rising rates/inflation
- Long-term compounding High-quality asset owners often deliver attractive total returns over multi-decade periods
- Strategic asymmetry Offers protection precisely when many conventional equity strategies struggle