Making Hay Monday - June 23rd, 2025
Petro... Bravo?
Hello, Subscribers!
Before I launch into today’s investment highlight, I thought I should describe some modifications my team and I have made, or will be making, to our publication process. Both relate to our attempt to please as broad a section of our subscribers as we possibly can.
The Haymaker readership is quite diverse. Some of you are highly sophisticated financial professionals; others are knowledgeable do-it-yourselfers; quite a few are clients of my former firm, Evergreen Gavekal, where I was Co-chief Investment Officer for many years; most of the rest of you are mildly interested in markets and economic trends, but are not motivated enough to become paying subscribers.
For whatever reason, possibly a lot of sharing of our full letters, the latter are the overwhelming majority of our readers. Frankly, this is a source of considerable frustration to the elderly Haymaker as this publication’s primary author. Accordingly, I ask you not to share the behind-the-paywall material without our permission. And we’d also greatly appreciate it if you would help us grow our paying subscriber list.
Increasing the subscriber population is as essential to a financial newsletter as new buds are to a healthy plant. Frankly, endorsements of Haymaker editions to your friends and family are the most effective way for this newsletter to survive and, hopefully, thrive. As the old saying goes, either you grow or you die.
On the other hand, we are aware that some readers want the details, particularly when it comes to specific investment ideas. As a result, we’re reluctant to leave those out.
The other modification is that we’ll be eliminating our Charts of the Week. This is being done both to shorten our Making Hay Mondays as well as to recognize that, in recent months, we’ve been sending you a Daily which almost always includes a chart or relevant visual. If enough of you want us to continue running our Charts of the Week, we’ll listen to your wishes and likely reinstate them.
Now let’s get to the fun stuff…
“In the end, free cash flow is all that matters.” -Charlie Munger, Warren Buffett’s longtime partner.
Petro… Bravo?
The investment equivalent of a baseball triple play is to find a security that is denominated in an undervalued currency, is trading at a deeply depressed price, and generates a husky cash flow. As you no doubt suspect, that’s what I’m showcasing for you today.
In prior Haymaker editions, I’ve repeatedly made a bullish case for Brazilian stocks and bonds. The Brazilian stock market is up 23% this year, at least based on the U.S.-traded ETF, EWZ. Ergo, it’s been a nice performer of late. However, its share price has melted from around $42 four years ago to a bit under $28 today. Part of that was due to a 12% drop in Brazil’s currency, the real, since June of 2021. Based on the famous Big Mac Index, the real is now 25% undervalued versus the U.S. dollar (USD). Thus, the first box of the triple play is checked.