Richard Beaven, Lead Portfolio Manager and Principal, Signia Capital Management.
Colin Kelly, Director of Research, Portfolio Manager and Principal, Signia Capital Management.
Spokane, Washington is home for these two portfolio managers.
Richard Beaven, CFA, is Lead Portfolio Manager and Principal at Signia Capital Management.
Mr. Beaven has 27 years of experience in the investment management industry.
Prior to co-founding Signia Capital Management in 2002, Mr. Beaven was the Director of Research and a Portfolio Manager for a $2B Pacific Northwest asset management firm.
In 2020, Mr. Beaven and Colin Kelly acquired an equal and majority interest in Signia.
Mr. Beaven also currently sits on the Board of Directors for NYSE listed Idaho Strategic Resources (IDR).
Mr. Beaven holds a B.A. in business administration from the University of Kentucky and an MBA from Gonzaga University.
In addition, he is a CFA charterholder and has served as President of the CFA Society of Spokane, Washington.
Colin Kelly, CFA, is Director of Research, Portfolio Manager and Principal at Signia Capital Management.
Mr. Kelly has 18 years of experience in the investment management industry.
Prior to joining Signia in 2009, Mr. Kelly was Vice President of Equity Research for a Pacific Northwest asset manager.
In 2020, Mr. Kelly and Rich Beaven acquired an equal and majority interest in Signia. Mr. Kelly also serves as an adjunct finance professor at Gonzaga University.
He holds a BBA with emphasis in finance and marketing from Gonzaga University. In addition, he is a CFA charterholder and serves on the Board for the CFA Society of Spokane.
In this 4,143 word interview, exclusively in the Wall Street Transcript, these two Spokane, Washington based money managers explain the methods that brought them successful portfolio returns.
Mr. Kelly: It was pretty broad-based for the most part, from a sector standpoint. But certainly energy and durables lead for us.
We had a decent energy weight early in the year — actually coming out of the pandemic, we were pretty significant energy weighted.
And there was underinvestment for the past decade within that space.
And with U.S. reopening and increasing oil and gas demand, a lot of these names were still beaten down.
A name that we owned back in early 2020 was Patterson-UTI (NASDAQ:PTEN). And at that point, that was really a mid-cap fallen angel that had traded into the micro-cap space. And they’re one of the largest U.S. land drillers here in the U.S.
And after talking to the company, we were buying Patterson in the $5, $6 range, so we were paying $0.25 on the dollar for replacement cost of their rigs.
So, as you fast forward today, Patterson has tripled in value.
We exited that position, and we’ve been able to rotate into some other energy names with more focus on offshore, which may be a subsector within energy that has typically been later cycle than the onshore names, such as Patterson.
Mr. Beaven: In the early part of 2020 through the pandemic, we actually saw oil go negative.
And so many of these companies that we’ve watched for years and years were trading significantly below their book or replacement value.
So as contrarians, we tend to gravitate to where the real value is.
And at that point there were so many opportunities, because ultimately, we were convinced that the U.S. and the world needs energy. And that ultimately demand is going to come back post pandemic. So we needed to find the best of breed and the best companies out there to fortify the portfolio.
So back in 2020, we were more focused on U.S. onshore.
And that’s more of the short-cycle companies that immediately were able to put capital to work and grow earnings in a more short-cycle environment.
And as we enter in the middle of the latter parts of the energy cycle, a lot of the names that hadn’t participated in the early stages of the energy recovery were those names that focus on offshore.
And there’s just been very little activity offshore, offshore drilling.
And so at that point, in mid last year and into late last year, we found the opportunity to buy names like Diamond Offshore (NYSE:DO), which is one of the dominant providers of deepwater drilling rigs in the Gulf of Mexico and around the world.
And Helix (NYSE:HLX), which is a provider of plugging and abandonment services and other offshore services.
And also Dril-Quip (NYSE:DRQ).
So our energy focus is still there, but it’s transitioned from more U.S. onshore to offshore, and deepwater, where that part of the cycle is really just, from our perspective, beginning and getting traction.”
The future investing strategy for these Spokane portfolio managers is also contrarian based.
“…As we progress over the next number of years, we’ll see a slow transition away from hydrocarbons ultimately to nuclear, wind, solar, and other less carbon emitting forms of electrical generation.
And then also a transition to electric vehicles.
So the implications surrounding those create some interesting investment opportunities.
And one of the ways that we’ve found is to leverage that is the copper market. So broadly, it looks as though copper demand over the next number of years should continue to pick up as the load factor of copper for EVs goes from an internal combustion engine of 50 pounds to an EV of 150 pounds.
So a pretty big step up per vehicle and as it relates to copper demand.
One of the names in our portfolio that will benefit from increased copper demand and ultimately, hopefully, a rising copper price would be Taseko Mines (NYSEAMERICAN:TGB) mines.
Taseko is a producer of copper in Southern British Columbia.
They produce about 130 million pounds there. And they have a new project in Arizona that over the next couple of years should add an additional 70 million pounds of production that’s produced via in-situ mining.
So it’s a very environmentally friendly way of producing copper via injecting a liquid into the ground. And that is very much less energy intensive, very low cost, and with less impact to the environment.
So they are able to produce refined copper at a very, very low price.
Taseko is one of the names that will benefit as we enter an environment of increased copper demand, and possibly a very, very tight copper supply/demand dynamic.
Not only are they currently producing copper, but over the next couple of years they will almost double copper production via a very environmentally friendly method in Arizona.”
Read the entire 4,143 word interview from this Spokane, Washington duo, exclusively in the Wall Street Transcript.
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