Where to start with 2026 so far?

There’s been a lot going on. Iran, Venezuela, a short squeeze in Silver, Davos, New Fed Chair announced….and the rest.

At the same time, it’s important to remind ourselves that what really moves markets is not what dominates the headlines in the newspapers (which are usually all negative) but rather factors such as the outlook for corporate earnings, and inflation expectations.

Currently we are in an environment where people got too negative on the outlook for economic growth, and by extension corporate earnings, while expecting inflation to be higher for longer.

What is currently transpiring is economic growth staying stable (and positive), while we have disinflation coming through. This is the most bullish scenario for equities as both economic growth and inflation is better than expected.

In this scenario you would expect small caps to outperform large caps, high beta stocks to outperform low beta and cyclical stocks to beat defensives.

All this is happening. The only surprise is that crypto is not performing well - although this could be the 4 year cycle in Bitcoin holding true.

So, consider this a useful reminder to not get too distracted by the headlines and geopolitical news.

Focus on what really moves the market.

Stock Updates

Purecycle Technologies ($PCT)

This stock had a disappointing end to the year, falling throughout November and into December. Here’s why.

Read more

Although at index level, the pullback is quite a small one, under the surface many of the retail favourite names have been hit hard. None of the stocks below are the very speculative ones that retail has got over excited by e.g. Oklo, Coreweave, Strategy

However some of the names, like PCT and TE have been caught up in the sell off as they have a retail following. Indeed, yesterday (the 17th of November), I saw TE down more than 5% while another solar energy play (JKS) was up 13%….the main reason? A popular Substack account had sold TE to buy JKS. This is the market we live in. Retail moves names, and tracking retail influencers helps us understand why things are moving.

Background

To put together this list, I wanted stock ideas that could be used to populate a portfolio.

This means I want a spread across sectors, and ideally factors.

So, for example, stocks like BCO, BRSL, TPL are useful because they are not following a theme that lots of US retail investors are playing i.e. the retail crowding factor is lower

Ideally the list is also diversified across countries hence the inclusion of HKX, Petrobras.

However, it’s not designed to track a benchmark. The number of names in each sector reflect a) my confidence in that sector and b) if the sector is best played with one or two stocks, or a small basket.

So, without further ado here is my current list:

• Cavendish - CAV.LON

• Peel Hunt - PEEL.LON

• Brightstar Lottery - BRSL

• The Brinks Company - BCO

• Texas Pacific Land - TPL

• Hong Kong Exchange and Clearing - HKXCY

• Petrobras - PBR

• Alphamin - AFM.V

• Power Metallic Mining - PNPN.V

• Mako Mining - MKO.V

• Sylvania Platinum - SLP.LON

• Tharisa - THS.LON

• Purecycle Technologies - PCT

• T1 Energy - TE

• First Solar - FSLR

• Fairfax India - FIH.U

• KR1 - KR1.AQ

• Nektar Therapeutics - NKTR

• Journey Medical - DERM

In time a write up of each stock will appear on the site, along with follow ups.

Some names, like Cavendish and Peel Hunt are in there to play a short-term potential theme. I will cover it in a note soon. Essentially, they are potential asymmetric plays on possible changes to the ISA or pension rules to support UK capital markets. If changes do not appear next week in the November budget, they will likely be removed from the list.

Performance of individual stocks covered will be tracked, but not as an overall portfolio. I’m expecting the reader to use this as a source of ideas, rather than a portfolio to follow.

The content on this page is for information purposes only. It does not constitute investment advice or an offer to buy or sell any security. You are solely responsible for any investment decisions you make based on the information provided.

Please remember, past performance is not a reliable indicator of future results.

Members of the team may hold personal positions in some of the companies mentioned.

Macro News:

The last fortnight has been noisy…but nothing much has really changed investment strategy wise.

A year end melt-up sounds looks plausibly as fund managers chase the market. Remember many were caught out in April and have had to play catchup since.

The main risk spooking fund managers at present is private equity/credit – and there has been some examples of fraud in that space. However, it’s important not to let memories of the 2008 financial crisis cloud our judgment every time some credit problems appear. 2008 was before social media really took off, and I wonder if some of the insane lending that caused the US housing bubble could have occurred with social media. Perhaps I’m being overly optimistic, but I imagine the people taking out the so called NINJA loans back then would have been all over social media boasting about it (and probably selling an online get rich quick course off the back of it). With that much visibility, would the bubble have still been able to inflate so much?

Anyway, continuing with the optimism I notice the IMF upgraded forecasts for economic growth in 2026. Inflation also continues to slowly come down (it’s still above target in most developed nations, but it’s incremental improvement).

All of which contrasts with the BofA fund manager survey which showed most fund managers (70%) choosing stagflation as the word best used to describe expectations for the next year (other options where boom, stagnation and goldilocks).

So, fund managers expect stagflation while inflation is dropping, growth is being upgraded, and the fund managers themselves hold record low levels of cash…..

I think the stagflation talk is overdone and should start to recede for a while.

Stock Update:

Perpetua Resources ($PPTA) announced a strategic equity investment today from Agnico Eagle Mines and JPMorganChase. They view this funding as better than selling a royalty or stream on the future gold mine.

The market reaction has been positive.

Stocks to Watch:

A recent FT article claimed the chancellor is considering a change to the Stocks and Shares ISA rules in November (the budget is the 26^th)

To help support the UK capital markets the rumour is that going forward a certain % of the ISA would have to be held in UK stocks, similar to the previous PEP rules (which were 75% and then 50% for context)

ISA reform is something that keeps rearing its head. Changes to the Cash ISA allowance are also rumoured, and more likely to happen in my opinion.

If, the mandatory UK stock allocation comes to pass – this could have a big impact on UK stocks. Buying any high beta UK stock would likely work.

However, I think I’ve found a few stocks that would benefit more than most.

Here is one of them:

Read more

Paul Tudor Jones did an interview yesterday saying the market reminded him of 1999. It’s easy to see the comparisons looking at the Shiller P/E and the circular investments being made by AI linked companies…in each other.

However…I’m still running risk on for now. Hedgeye have pointed out that the amount of put buying (presumably as protection) is 3 times higher than usual. This, along with numerous people calling the market a bubble gives me some comfort – after all, a true bubble has all but the most stubborn of contrarians bought into it.

I am also reassured by valuations outside of the big US tech companies. This is what makes it different to 2008 (another comparison that could be made) as pre-2008 research pieces from companies from GMO would remark on how everything, globally, looked expensive.

I’m finding plenty of cheap stocks.

If I’m wrong and it is 1999 all over again – well value stocks actually did ok from 2001 to 2007. They fell less in the bear market and recovered faster.

One risk factor that I could imagine causing issues, is the bond market. Japan is close to electing a prime minister who has made comments about doing more fiscal policy. If this transpires, then it’s easy to imagine a scenario where inflation in Japan continues to rise and so do bond yields. If Japanese investors react by selling foreign bond holdings to buy their own (given the higher yield on offer), then this could have a knock-on effect for other countries. Given the debt levels and political turmoil in France, perhaps it’s their turn for a Liz Truss moment – although what the ECB would do, is unclear.

One to keep an eye on.

Stock Update

Purecycle Technologies ($PCT) written about here: PCT comments

They spoke at a conference and released the presentation. Notably a Volkswagen bumper was used to demo the ability of PCT to recycle. VW would be a good customer for PCT to sign – instant credibility achieved.

PCT has also been benefiting from its factor exposure in the last week. I suspect that until it hits profitably, it’s going to stay in the Goldman Sachs ‘most shorted’ basket - stocks in this basket have had a good past week as that factor performed well. It’s possible that rumours of the Trump administration consider a $1,000 - $2,000 handout to low-income earners brought back memories of 2021 and hedge funds did a bit of short covering.

Stocks to watch

KR1

This is my only crypto exposure.

Read more

We are at the end of the month, and the end of a quarter. September was expected to be weak, due to seasonal effects. That hasn’t been the case however and it’s possible fund managers caught offside now have to chase the market into year end to catch up on performance.

I’m still running risk-on.

Stock Update

Power Metallic Mines released their as…

Read more

No major surprises last week. I’m not intending to comment heavily on macro as there is plenty of commentators already doing that job. The only notable point I’ll make is inflation in the UK came in at 3.8% and reinforces my belief that we are in a period that benefits real assets.

Sometimes a simple-sounding idea can do a lot of heavy lifting. The simple idea that is acting as my north star, is that when private sector debt to GDP is elevated you have to worry about private sector bankruptcies bringing that debt down. In which case, worry about deflation and buy bonds to hedge equity risk.

When public sector debt to GDP is high, worry about inflation bringing it down and buy real assets to hedge your equity risk.

This framework continues to serve me well.

Stock Update:

By way of follow up to last week’s digest: Last week's post

Nektar Therapeutics finished up 12.53% last week. They announced positive trial results last Thursday that suggest a longer lasting effect from their drug Rezpeg. I’m still bullish on the stock and not looking to trim the position yet.

Three stocks to watch:

Power Metallic Mines ($PNPN.V)

Small Canadian listed mining exploration company. Current market cap is $263m.

They have a promising polymetallic deposit – meaning multiple metals (nickel, copper, silver, gold and PGMs).

The polymetallic nature of the deposit is advantageous because it provides multiple revenue streams from a single mining operation. Instead of betting on just one commodity price, Power Metallic can extract and sell nickel, copper, silver, gold and platinum group metals from the same site. This diversifies their revenue risk - if copper prices fall, strong gold or nickel prices might offset the impact. It also improves the overall economics since the fixed costs of mining and processing infrastructure get spread across multiple valuable outputs.

The CEO put out a short twitter video last week, saying they are releasing assay news on Monday as well as some other unspecified good news they just received.

The thing that makes this company really interesting to me, right now, is that they intend to list in the US, in October. I always look out for these occasions. When a small cap stock with an interesting story suddenly becomes more easily available to US retail investors – rapid repricing can occur. The investor base also includes some well known mining investors, that gives some additional comfort to generalist investors.

I’m long the stock. It’s a speculative stock as with all mining exploration companies, and will also move with commodity prices.

It is available on the HL, Saxo, & interactive investor platforms.

Texas Pacific Land ($TPL)

The biggest company I’ve written about so far, with a whopping $21b market cap.

Owns almost 900,000 acres of land in the Permian Basis and gets royalties on oil & gas produced on their land. In recent years started earning royalties on water sales as well as developing a water business – similar to Waterbridge (link below) which carried out its IPO last week.

Waterbridge

It turns out that dealing with water issues is a big issue when producing oil and gas in the Permian, and the amount of water to be dealt with is a growing problem.

But back to the energy side of the business.

TPL is my only energy play at present. I will probably do a longer piece on it shortly. One thing I think the market is missing is the outlook for natural gas pricing at the Waha terminal, which is frequently at a big discount to Henry Hub. There are reasons why this looks likely to change in the next couple of years, and TPL would benefit as their gas royalties are priced at Waha prices.

This is more of a buy and hold, compounder type of stock holding for me – one that adds something different to my portfolio which has a lot of less liquid small cap stocks.

Risks include commodity price volatility and a premium valuation (43x trailing P/E), though this multiple may be justified for a business owning non-depreciating land assets.

Seaport Entertainment Group ($SEG)

Back to the small caps! ($311m). This one was a spin off from Howard Hughes last year. It immediately caught the attention of many investors who have read Joel Greenblatt's oddly-titled but excellent book on special situation investing. The book advised the reader that any time you see a spin off with a rights issue – stop what you’re doing and start researching.

Seaport was spun off as a slightly odd collection of assets that frankly hadn’t been working for Howard Hughes. The assets include air-rights over a Las Vegas hotel, a baseball team, a stadium….and most interesting to me, a bunch of New York real estate.

Given the small size, most institutional investors wouldn’t be doing the work on Seaport. Even if they did and found it interesting, they couldn’t take a meaningful position – so it’s not worth the research time to them.

It is to us though.

When I was researching the business last year, I found a very good Substack account belonging to Chris Waller. He’s a former small-cap equity analyst, now running his own fund in the US. I paid to subscribe to his Hidden Gems Investing Substack as he put out a very good 35-page report on Seaport (and another this last week as follow up). His research reinforced my view that the assets are worth considerably more than the current market cap would suggest.

The way I’m looking at Seaport now is:

The company has $162m of net cash on its balance sheet.

The value of the combined properties is estimated at more than double the market cap.

I view it as effectively a turnaround situation. As Greenblatt’s book also stated, it is often the second year of a spin-off where the new management has had a bit of time to work when the real outperformance happens. It was August 2024, when the spin off completed, so we are now in that phase.

The management have made sensible changes to make the New York real estate complex, more of a destination venue. Sensible things like putting a roof over an outdoor terrace, so you can hold events in the winter as well as summer are welcome.

Signing an anchor client for the destination in the form of an immersive experience venue (Meow Wolf) also sounds like progress.

I will leave the reader to explore the company in more detail at their leisure (the Value Hive podcast had an episode with Chris Waller on Seaport).

I don’t have an immediate catalyst in my expectations; this is a position that I expect to play out over the next 18 months or so.

The current share price is $24.5, I would start looking to scale out of the position, all other things staying constant, if it got above $40.

Risks include the execution challenges of turning around underperforming real estate assets and the inherent illiquidity of property investments.

That’s all for this weekly digest. Have a great week.

The content on this page is for information purposes only. It does not constitute investment advice or an offer to buy or sell any security. You are solely responsible for any investment decisions you make based on the information provided.

Please remember, past performance is not a reliable indicator of future results.

Members of the team may hold personal positions in some of the companies mentioned.

By that point I had spent 18 months running and living off my own personal portfolio. Prior to this I spent my entire career working as a Portfolio Manager, running private client money in UK wealth management firms. In the time running my personal money, I was pleasantly surprised by how many good stock ideas can be found, with enough time and a strict filter, by reading social media and newsletter platforms. My suspicion is that the decline in active fund management has left many equity analysts starting their own gig instead of working in a big corporation.

My friends had been asking me for investment ideas and where to find them. As I had these conversations, a kernel of an idea started to form.

They were describing the following pain points:

1 – Where to find good sources of ideas

2 – The time taken to filter the good ideas from the bad

3 – If subscribing to multiple substack accounts or similar concepts, such as Woodford Views, the cost soon started to add up

4 – Most investment newsletters are global and do not focus on the requirements of UK investors, or discuss portfolio construction

Defiance Research is a solution to these pain points.

In my personal investment process, I generate my idea flow through observing themes that I see in markets, and by subscribing to a dozen different research services.

As my strength was always in the filtering of ideas, rather than doing the in-depth primary research – this translates well to solving pain point 2.

By curating ideas from multiple sources, Defiance Research also solves the cost problem - subscribers access insights from several premium services through one affordable subscription.

Whilst investors from anywhere in the world are more than welcome to join, I will often reference UK tax implications, and which UK stockbrokers have access to which stocks.

To be clear, this doesn't limit the investment universe - I research opportunities globally but always consider how UK investors can practically access them.

My intention is to keep Defiance Research small, personal and high quality. I'm committed to staying focused on what matters most: finding and analysing compelling investment ideas. If the business grows too large, my time available for research will decline and quality will inevitably suffer. Therefore, subscriber numbers will be intentionally limited to maintain this boutique approach.

A few important notes on compliance and transparency:

The business is unregulated and intends to stay away from regulated activities. So, there is no personal financial advice provided. Please read the disclaimer and reach out if anything is unclear.

As a matter of good practice, I will disclose when I hold a position in a stock. I will also have a self-imposed trading blackout where I will not transact in any stock I write about, in the week before, or the week after publication.

Disclaimer:

The content on this page is for information purposes only. It does not constitute investment advice or an offer to buy or sell any security. You are solely responsible for any investment decisions you make based on the information provided.

Please remember, past performance is not a reliable indicator of future results.

The Federal Reserve should make a long anticipated 25 bps cut on Wednesday. The market is pricing in a 94% probability as can be seen here: Fed Watch Tool

They have said they are going to focus on the unemployment part of their mandate for now, as they believe the inflation issue is under control. Hedgeye Research, which I subscribe to, are expecting inflation to slowly increase into the back end of the year. This means that expectations for further cuts at the end of October and the middle of December could be unjustified. Currently the market puts a 77% probability of December seeing a target rate of 3.25% – 3.75%. That would be meaningfully lower than the current 4.25% - 4.5% and likely requires a lot of bad news on the jobs market.

The Bank of England also makes a rate decision on Thursday – no change is expected (so holding at 4%)

UK employment data is out on Tuesday and UK inflation on Wednesday. Core CPI is expected to be 3.7%.

This is not an exhaustive list of all macro news out this week, just the main ones.

Market View

I don’t have a strong view on market direction at present. The underlying narrative to the market seems to be that the US will run the economy hot, and monetary debasement trades are popular as a result (see the performance of gold)

My portfolio remains fully invested in equities, mostly in small caps, where stock specific risk is high. I don’t aim to track a global small cap benchmark, but that would be the most appropriate benchmark should I ever feel the urge to show off (hopefully).

Stocks:

Three stocks that are top of mind right now:

Nektar Therapeutics

Purecycle Technologies

Alphamin

Note: the best way to search for news and debate on these stocks with Twitter/X is by searching the ticker e.g. $NKTR

If the results get too messy (thanks to spam accounts) add a space then ‘min_faves:2’ to help cut out the spam, which doesn’t normally receive 2 or more likes per post.

Nektar Therapeutics ($NKTR)

The health care and biotech sectors have lagged the broader market this year so far, so I’ve been spending some time looking at a few stocks in this area. Nektar is one of two I hold.

This stock is moving now. It had three consecutive days of double-digit returns last week, on the back of a competitor’s drug producing disappointing trial results.

Market cap is just under $1 billion. It’s held by a couple of very good healthcare investors. A detailed write up was done by a Twitter/X user using the handle: @A_May_MD

His detailed write-up is here: Nektar Write Up

I was really impressed to find such a comprehensive piece of research, and it shows how the world of equity research is evolving. I note, he has also had success recently with another biotech stock ($ABVX)

The author makes a compelling case that their Rezpeg treatment has had very good results in trials so far, and the market for Atopic Dermatitis (also known as atopic eczema) is substantial.

I don’t normally invest much in the healthcare sector as I lack the specialised knowledge, so this was a small position initially. It has since grown to over 5%. I’m continuing to let it run, as they present trial results to a healthcare conference on Thursday (the 18^th of September) and they could reach an out of court settlement payment anytime soon (read the detailed write up referenced above for details)

From a portfolio construction standpoint, I like the low correlation the stock will have to the rest of my portfolio. If the US economy does slow, to the point of recession, less economically sensitive stocks with a lot of stock specific risk like NKTR should still hold up reasonably well.

The stock is available on most UK stockbroking platforms, as is PCT below…

Purecycle Technologies ($PCT)

This is my biggest position.

It’s a stock I’ve followed for three years now, since I heard Mike Taylor describe it on a Hedgeye presentation. The potential here, is significant and long lasting.

They have a new way of recycling plastic (polypropylene) called dissolution technology. The technology was originally developed by Procter & Gamble and licensed to Pureycle.

With hindsight, the company probably went public a bit too early (via SPAC in 2021). It had covid-related delays constructing their first plant as well as engineering challenges.

At this point, they report they are reliably running at 87% of the plant capacity and still improving.

In their second quarter earnings, they stated they were in 17 post-trial negotiations – meaning purchase orders should be forthcoming. The relevant slide is below. For reference, expected pricing for their product is circa $1.36 per lb.

I believe investors are still in wait and see mode after being disappointed by the time taken to get the first plant up and running – hence purchase orders coming through could be a meaningful catalyst.

The company is also guiding to break even by the end of Q4 or Q1 2026. This would be another milestone for investors to tick off.

I will do a longer write up on the company soon, and what I like about it. For now, I eagerly await news of purchase orders.

Valuation is never an exact science, and where we have a company like PCT at such an early stage it’s even less exact.

The way I’m thinking about it, is the company has a target of $600m EBITDA by 2030. Putting that on a 30x multiple gives a market cap $18b. Discounting back 5 years at 20% give $7.2b.

As the current market cap is $2.4b, I’m not even considering trimming the position until some of that upside is realised.

The 30x multiple might sound expensive, but given the expected margins and growth rates, I actually suspect it will turn out conservative.

Plenty of risk exist in the execution though, so it’s one to watch closely.

Additional Information:

Check the company website and the excellent Reddit group:

https://www.reddit.com/r/PureCycle/

Alphamin ($AFM.V)

Canadian listed mining company. They operate a tin mine in the DRC, so usually a description that puts people off!

Tin is a metal that goes under the radar of most investors – most likely because there’s only 2 or 3 listed tin producers globally (Metals X is the other I follow, based and listed in Australia)

It is used in a lot of applications, the most memorable for me, is that it’s used to produce solder. The ‘glue’ that holds circuit boards together.

The mine has the highest-grade tin deposits in the world. It operates at the lowest-cost quartile of the global tin producer complex.

Global demand for tin is in the region of 376,300 tonnes and is expected to grow at 2-3% every year. Alphamin produce 20,000 tonnes a year, meaning they are circa 5% of global supply.

Given the current geopolitical backdrop, I expect the US is aware of the importance of Alphamin and its mine. Most global supply comes from China, Indonesia, Myanmar and Peru (70 – 80%).

When the civil war in the DRC caused Alphamin to shut down production in March & April for roughly five weeks. It’s not entirely clear what action the US took diplomatically, but the M23 rebels withdrew from the area, and I note media stories about a potential peace deal being signed this month (the 23^rd of September has been mentioned).

The security risk is what has prevented me from investing before, despite having followed from afar for 3 years. Having seen how quickly it got resolved earlier this year, I feel comfortable with a position in the stock.

Moving onto valuation, here is a screenshot of the Income Statement from the latest update

The market cap in USD is $900m. If we take the last six months net income figure and double it to get a back of the envelope annual profit estimate, then Alphamin sits on a P/E of 6.7x

This six-month period includes the time when the mine had to shut down for security reasons.

The balance sheet is strong, and there is the possibility of exploration results leading to a resource upgrade.

They pay a 7 cents (CAD) semi-annual dividend today (the 15^th). Friday’s closing stock price was 0.97 CAD for reference. So, we are looking at a 14% dividend yield, with the company mentioning the possibility of a special dividend in November as well.

I think the risk/reward here is good. If the price shot up to $1.5 tomorrow for some reason, I’d be reducing the position, and if it hit $2, I’d probably be out. For now, I’m happy to hold.

As with Nektar Therapeutics, the risk (in this case jurisdiction risk) means position sizing is important. In my 100% equity portfolio, this would be between 2.5% and 5%.

The stock is not available to buy on platforms like Hargreaves Lansdown, who don’t have great coverage of Canadian stocks. It is available on Saxo Markets and interactive investor for both ISA and SIPP accounts.

All three stocks have potential catalysts in the very near term. I look forward to updating as needed.

As a reminder, nothing here is financial advice. This is purely for information purposes only.