YWR: Q1 26 Performance Review
I miss the $ debasement trade.
Let’s review the Q1 performance of our two portfolios (Dirty Dividends and Cash Dragons) as well as the overall liquid allocation.
The purpose is a no BS quarterly review of what’s working and what’s not. Plus share my thoughts/reactions.
I also always want to be clear which ideas I own and which I don’t. As in ‘Has he put his money where his mouth is at?’
So it’s good to periodically show where I actually have positions.
Note: This portfolio information is also available at (www.ywr.world/portfolios).
Q1 Performance
Dirty Dividends started the year strongly but, gave it all back in March. The portfolio’s dirtiness (energy and coal) really helped in March.
Cash Dragons had major problems with its tech investments in Alibaba and Baidu. More on that below.
Everything together (Dirty Divs, Cash Dragons, Gold, AI, Other) is -2% YTD. Not terrible all things considered.
Dirty Dividends
The only notable change was that I added a small position in Frontline. I got sucked in by the high dividend yield (11%).
My shipping expert friends say I’m a shipping tourist and going to get wiped out. Yet the YWR Factor Model and QARV keep flagging that something positive is happening to shipping. Yes, there are still ups and downs, but the data says there are a lot more ups. The 5 year average ROE’s are screening surprisingly well. I keep thinking there could be a new normal unfolding for shipping, but nobody has articulated it well yet. Or, the smart ship owners know it, but aren’t saying anything.
I need to decide if I should add more.
Otherwise, the only trading was reinvesting dividends to existing positions.
I’ve been building up the Korea ETF and SK Hynix to slowly reduce the Europe exposure.
Other Observations:
Unicredit is the JP Morgan of Europe and Andrea Orcel is the new Jamie Diamond. I’m going to let Orcel do his thing for years and watch the Unicredit share price compound. It’s my biggest position, and in May I’ll be excited to tender my shares in Commerzbank for more Unicredit.
Jackson Financial always looks insane.
SK Hynix also looks insane although the dividends so far have been crappy. Everyone’s big fear is memory is a bubble. Which is what the 5x P/E is saying too.
I might add to the Korea ETF. I like the idea of Samsung as the new TSMC on a P/E of <7x, plus all the other Korea goodies (SK Hynix, Korean defence, Korean banks, Hyundai).
Ping An looks looks very undervalued and is consistently growing their dividend. Just announced RMB 2.7/share. This should trade >HK$ 100/share in the years ahead.
Vinci… if you ever feel you need to invest in a private equity infrastructure fund, invest in Vinci instead. Vinci started out with the biggest toll road network in France, then used the toll roads as a cash cow to become the largest owner of private airports in the world and soon the largest global toll road operator too. Steady, eddy growth. Steady, eddy dividends.
I should buy a little more some day.
But then I’m trying to invest more in Asia.
But then maybe the European companies are doing the same thing for you.
So buy Vinci and get ROW growth with a ‘Europe’ discount?
The Gravitational Pull of the US.
Macro strategists often predict how money is going to withdraw from the US, but when I look at the results presentations in the YWR portfolio, I see the complete opposite.
I see a lot of companies trying to grow their US operations. Because it’s the biggest market in the world; it’s growing, it’s dynamic and if you don’t have scale in the US it becomes a competitive disadvantage.
Take Barclays. They went through a big exercise to refocus around core businesses where they could earn high ROE’s, and surprisingly US Consumer Banking (USCB) was one of those core businesses they decided was strategically important.
I always thought how on earth is Barclays going to be able to compete in US credit cards, but to my surprise they have built a profitable and growing business managing loyalty credit cards with a 16% ROTE. Barclays stuck with it, and now as it starts to scale investors are realising it could end up being quite valuable.
I never understood why in 2025 Santander announced they were selling their Polish Bank to Erste for EUR 7bn. It seemed like a big earnings hole to fill. Then in February it made sense. Santander is acquiring Webster, a US regional bank, for $12 billion, which makes Santander a top 10 player in the US.
Like Barclays, Santander is trying to bulk up its US presence. What they both want is access to US retail deposits at scale. The US is the money tree and you need to be there.
Total, a French energy company, is trying to Americanise as fast as possible. Total went through great lengths to convert their ADR’s to full ordinary shares trading on the NYSE. This gives them better currency for strategic US M&A.
Total also realises the future importance of the US as the global supplier of LNG. Total are actively investing in Texas LNG terminal infrastructure and natural gas assets. We will talk more about this trend, because it’s massive.
Mercedes is investing $4bn into a new car plant in Alabama.
SK Hynix is investing $4bn in an HBM chip packaging plant in Indiana.
I highlight these data points from the YWR portfolio because it corroborates the other data we see.
The US is Booming and it’s pulling in investment from around the world.
Cash Dragons
Cash Dragons had a pretty bad Q1 (-12%).
There were no trades in the quarter.
Tencent (-21%), Alibaba (-16%) and Baidu (-15%) were all down, but Alibaba worries me the most. Tencent, on the other hand, is probably a buying opportunity.
Alibaba’s EBITDA declined -57% yoy as they ‘invested’ in quick commerce. Meanwhile, we are supposed to celebrate the 36% growth in ‘Cloud Intelligence’.
Chinese online retail competition is intense and apparently to stay in the game you have to be willing to involute yourself (make no money). It’s a common problem with investing in Chinese stocks. Alibaba is giving up margin in E-Commerce but says the future is its AI stack where it has the Qwen LLM, Alibaba Cloud and T-Head chips.
We are supposed to look through this near term carnage and imagine the enormous growth in the AI related businesses, but sheesh, it’s going to take a lot of Cloud to replace RMB 25bn in E-Commerce EBITDA that just went up in smoke.
This is a similar pattern to the collapse of Baidu’s paid search business, although Baidu seems to be coming out the other side. Baidu also touts the growth of their AI stack (Ernie LLM, Cloud, Kunlun Chips and Apollo Go).
I’m not sure what to think of this.
On the one hand I’m still ‘up’ on these stocks and I kind of want to see how it plays out. I wonder if this is the new vertically integrated moat of the future (LLM, Cloud, Chips, Apps). Amazon, Google, Tesla, Microsoft are all going down the same road.
On the other hand I wonder if these stocks are always going to be running to stand still. Will it always be Waiting for Godot? As soon as cloud and chips make money will they involute themselves all over again?
Or, is the LLM-Cloud-Chip-App stack harder to recreate and finally they make money?
And the problem with the fact Alibaba and Baidu don’t pay much/any dividends is there is no easy way to gradually pivot the portfolio away from the positions like we can in Dirty Dividends.
Oh well. I made this bed. I’ll stick with them.
Meanwhile, Tencent grew EPS 18% in 2025 and doesn’t seem to have any of these problems, although they did say they are going to invest a lot more in AI in 2026.
LVS is working, but it’s Singapore saving the day. Marina Bay Sands is closing in on $1 billion/quarter, which is insane for 1 property. MBS made more than the other 5 casinos in Macau put together (US$ 806 mn in EBITDA versus US$ 608 mn).
What does it say?
With RevPar of $900/night it’s another expression of the Elysium Analog.
The other takeaway is that China growing, but still sluggish.
I’m sticking with LVS, but we need the post-Iran NWO inflection.
Overall Allocation
Below is how all the liquid investments come together.
The whole pot was -2% YTD.
Summary view:
You know my view, but it’s not financial advice!
The US is booming.
Earnings estimates keep rising. Yes.
Iran is going to get sorted out and the world will be better for it (China in particular)
Markets will make new highs.
The best strategy is to stick with quality investments and, if possible, make small purchases through the downturn.
Otherwise, just hanging on to what investments you have while the tidal wave of negativity waterboards you is achievement enough.
Have a good Easter Weekend and look out for a special YWR surprise.
Erik