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Best Investment Idea(s) for 2022


Viking
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So what are board members best investment ideas to make $ in 2022? So what can a board member buy on Monday and expect to earn a reasonable return in 2022 (which i define as +10%). It can be a specific stock. Or a sector. Please include a couple of bullet points as to why you like the idea.

 

To get things started my highest conviction idea today is oil. Why? I think supply is more constrained than usual (due to ESG). And i think demand will continue to grow. I am also thinking we could see travel explode this spring and summer when we get to the other side of Omicron. Oil companies are very profitable with oil at US$70. Given how tight the supply/demand equation is today we could see oil at US$100 in 2022. My picks would be a basket of Canadian Natural, Suncor and Cenovus (there are lots of good choices); i am picking Canadian companies given i live in Canada and most of my portfolio is in CAN$.

- Lyn Alden: December 2021 Newsletter: The Fifth Age of Oil: https://www.lynalden.com/december-2021-newsletter/

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Lumber/OSB is also looking very interesting. This is a play on hot housing market in US and it lasting for years. If total US new housing starts grow in 2022 versus 2021 then this becomes a very good 1 year trade. IF lumber futures stay over US$1,000 into Q1 then this also could become a very good short term trade. My favourite pick is West Fraser (due to its OSB business which is more supply constrained than lumber and more levered to new housing starts). But a basket approach should also work. 
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Steel is also looking very interesting. Steel prices are coming down a little. Seasonal or buying opportunity? If steel prices average over US$1,000 in 2022 steel companies will make lots of money. Lots of secular tailwinds for steel: shift to electric vehicles, green power, infrastructure, return of manufacturing to US etc. On the supply side we have what looks like we now have an oligopoly. My favourite picks are Stelco and Cleveland Cliffs. Stelco: it will be interesting to see what Kestenbaum does with the cash hoard in 2022. Cleveland Cliffs: it will be interesting to see what Gonsalves will do in 2022.

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Inflation is crazy high as we start 2022. Where inflation goes in 2H 2022 will super interesting. I like having some exposure to commodities in my portfolio.

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In terms of specific companies, i continue to like:

- Fairfax at US$500 (just not as much as US$400). Insurance continues to be in a hard market. Fairfax BV is likely around US$600.
- Atlas at US$14. As new-build deliveries happen we should see EPS growth of 15-20% every quarter for the next couple of years.

- Fairfax India at US$12. BV is likely +$19 (with stocks in India selling off in Q4). India economy should grow nicely next couple of years. We likely will see another Dutch auction from Fairfax India in 2022.

Edited by Viking
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Great idea to have a talk about 2022 opportunities. My circle of competence is tech and especially social media/advertising, so thats what I stock to.
 

I’m waiting for lower prices on one of these:

- Alphabet (great content, alternative to mainstream media)

- VISA (strong moat)

- Microsoft (hard to live without for many companies)

- Apple (strong eco-system)

- Nike (amazing brand)

- Amazon (domination, so many products)

 

I also like

- Snap (so many opportunities going forward)

- Twitter (strong position on media and with celebrities)

But I’m waiting for them to have stable ROI, financials etc.

 

And I have 50% in Facebook (same reasons as Alphabet)

Edited by competitive-advantage
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4 hours ago, Viking said:


- Atlas at US$14. As new-build deliveries happen we should see EPS growth of 15-20% every quarter for the next couple of years.

 

 

The $15 strike 2023 puts offer a 27% return to whomever writes them and $15 isn't far from here.  I'm not sure why, the stock has not been volatile.

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It's really tough right now.  Not much I am crazy about. Often I will sell something that is up and buy 2 new positions.  As a result my portfolio is growing larger and larger, but quality is perhaps not going up.

 

At current prices I do like citigroup (C).  That would be my top pick.  It is trading somewhere around 8x earnings and returning cash.  It is very diversified geographically and due to size which suits me but still won't save it in a global rout.  It's around 4% of my portfolio.

 

I like twitter as well, saw it mentioned in one of the earlier posts.  It is down by half from it's highs and if you squint and make some assumptions I could see it as currently trading in the 35-40x 2022 fcf range.  Not for the faint of heart but I have a small position and may add.  It is still growing aggressively and has a lot of potential.  Dorsey, the former CEO and founder, stepping out is my main concern.

 

I also still like FFH.to but am up so much on it that I don't know if I can exactly pound the table for it (thanks for your and Xerxes and others opinions on that one, really made my year).  Also FIH, yes, I have a small position but I like it and I like India so I may add.

Edited by no_free_lunch
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How much risk are you willing to take?

O/G is an obvious choice, but there's quite some difference between 400-600% on the Canadian drillers, vs 10-40% on the tar-sand majors.

It's not just owning XYZ, its also ability to keep your hands off and let it run 

 

What's the yr 2-3 plan?

SNC is an obvious choice, but you would be rolling calls, and focused on the multi-year CAGR - not the 1 yr return. Cash from o/g gains and SNC margin, progressively funding a growing long position for a sale 3 years out  Mitigated risk of SNC running on you, while you are executing. Reasonable probability of continuing solid gains in Yrs 1. 2 and 3.

 

Different POV.

 

SD

 

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My two cents and investment theme...........2022 is the year when the Chinese economy comes off the skids IMO.......three convergent forces will in the next 18 months ensure that China will print negative GDP numbers or maybe the Chinese juiced up number equivalent of negative say +1.x%! Which we all know will mean they are in recession. Three reasons:

 

  • PROPERTY..... negative wealth effects from property sector bubble bursting/deflating - Chinese already have high savings rates and are economically sensitive to perceived wealth destruction. Savings rates will sky rocket & the economy will slow. Watch the paradox of drift rip through the soceity as folks mark down their apartments they'd hoped to flipping to the next guy by now but cant. Useless concrete box apartments in Tier 3 cities are clearly not going to be transacting for 2019 prices anytime soon, if ever again.
  • COVID Comes to China - Sinovac barely works against Delta, doesn't work at all against Omicron......there is almost zero base level COVID immunity in the Chinese population and Omicron is way TOO contagious to run a containment strategy successfully on a country of 1.4 billion people.....China will have a very rough COVID wave in 2022 with the inherent chaos it will cause to their economy
  • Post-COVID in the West = China slowdown - the world stayed home in 2020 & 2021 and bought made in china "things" from Amazon........post COVID savings and disposable income will be directed to experiences in the West to the detriment of MIC producers (add in here strategic supply chain alterations which will see some activity diversified away from Chinese producers to Vietnam etc etc.)

Put em all together a very rough 18 months for the worlds largest economy

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I was going to post something similar.  @gregmal absolutely called the Sunbelt Multi-family trends in 2021.  Holy crap.  I wish I had paid more attention to it.  I would love to hear what other people think 2022 key themes will be.  2020 was obviously covid beneficiaries. 2021 was a slaughter for the likes of $PTON etc.  On the RE side, I think $CLPR is poised to perform as the rent increases gets passed through via quarterly new leasing and lease renewals.  I think 2022 is finally the NYC recovery year.  NYC office may catch a bid as well.  Maybe? 

 

$FRPH remains my biggest position and one of my favorite as it benefits from infrastructure bill passage, pricing power in the aggregate royalty, Bryant Street should be fully stabilized and they should print a decent GAAP net income number of stabilization as well.  Their Greenville, SC (Sunbelt MF) should also stabilize well and print a really good GAAP net income number.  It is low leverage, good management team, and a sleep well at night.  Inflation will be very good for them.  Recession, they will weather it well.  Just solid all around.  

 

I like $PTON in small sizes, 1%.  I like $AMBP, it's boring packaging with lots of growth.  Potential to double in 2-3 years.  The $AMBP 5 year warrants are interesting as well. 

 

I have shorted some  TLT (20yr US Treasury) as I think inflation will eventually cause rates to go higher.  It's more of a hedge due to my large RE exposure.  

 

I think $HQI remains one of the more fascinating picks due to the jockey.  

 

$INDT trades close to NAV.  So it is not pound the table anymore.  But it will be interesting to see what the CEO/Chairman combo can do.  

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I think APO is attractive at this price. Pro forma for the Athene acquisition, it is trading at less than 15x multiple of 2022 distributable earnings, which is downright cheap compared to BX, BAM, or KKR. 

 

APO has a great PE business, and is definitely leading the pack in the pension risk transfer / annuity business that all of the alternative asset managers are trying to get into now. 

 

I understand that a lot of these earnings are pro forma spread related earnings, and the market certainly values FRE higher, but to me this is a great quality company that is trading at a 25-30% discount to the market, closer to 35-50% discount to its peers in the alternative asset management space, and has laid out what I believe is a persuasive case for 15-20% growth in distributable earnings. 

 

The stock is trading at $74, and expects to do $5.50 in distributable earnings in 22. I feel that a $110 price target is reasonable based on a 20x multiple, and there should be 15%+ earnings growth over the next several years, so I think this can do well. 

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46 minutes ago, BG2008 said:

NYC office may catch a bid as well.  Maybe?

Here's my problem with office. Its not really a recovery trade. MF was/is awesome. You know what unlocked Sunbelt mania 2021? When those governors kept things open in summer of 2020. Contrary to popular belief, not EVERYONE just went back to bars and clubs and all that shit, but it let the people who wanted to, do it. Those people then allowed/encouraged everyone else to dip their feet back in the water. Then it was a tidal wave of folks realizing they could go back to life as they wanted to live it. The neat thing with the covid situation is that after everyone gets back to normal, its over. Vaccinated or not, everyone will get this thing. So people go out and are free and comfortable and I mean if their worst fears happen, generally speaking, if you're young/healthy/vaccinated, you get sick for a week or something and then! IT really is over and you're on the other side of all this. So you just need that momentum to build. Thats why NYC not shutting down this past 4-6 weeks(and assuming they dont for the next 4-6 weeks) is absolutely huge. It lets the real recovery begin, which is the mental one. Next year you won't even be having these convos and everyday folks won't even care about the next variant. Then people start going bonkers for all the stuff they were hesitant to do prior. Which is why I think the coastal MF stuff and the entertainment stuff, casinos probably too, are just going to kill it for 2022. 

 

Office though? NYC NEEDS office to truly be back. You know how many businesses suffered from other businesses not doing things like holiday parties and all that? Or the workers who get out at 5 and spend hours at the watering holes? The bankers going to the strip joints and the strippers who then buy fancy clothing at the expensive clothing stores? Office is a big component of the engine that drives NYC. And who really drives office? Makes the decisions? Signs the leases...A bunch of rich, live in a bubble, cover your ass centric, risk averse blowhards. MF is how you play the people coming back. I haven't quite figured out what or how the office play works. Because its not recovery and its not "the people" who make it work. Its the c-suite. And those act out of their own self interest and survival instinct, so its really hard for me to see what pushes THOSE people, to all of a sudden get driven to push people back in. Gorman at MS apologizing recently for pushing people back to the office IMO was one of the biggest negative things to happen recently for an asset class. It kind of sends a message to others who pushed for a return to take notice, sit down, and STFU. 

Edited by Gregmal
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Actually,I think the reason why office is in the doldrums is because many (including the c-suite) don’t want to go back. If you live in nice home in the suburbs with a family, your quality of live goes up, if you are working from home. The 2 h + commute saved alone makes sure of it.

Its a bit different if you are the little grunt just getting started and need the Acknowledgment and the occasional help, which is much less likely over zoom etc. But those grunts don’t make the decisions.

 

I think it will take a while to get office back.

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Just got off the phone with my son who has an insurance agency in Calgary. He no longer has the expense of maintaining an office as he and his agents now are able to work from their homes and do much of their work online.

 

He has also been able to set up an agency in Toronto and other areas without the expense of having to maintain offices. He can also live pretty well wherever he chooses.

The idea of working from home is nothing new but Covid restrictions have proven to millions that they can do this quite successfully. 

 

Depending on how widespread his shift turns out to be, it could have a major impact not only on office space, but also on residential real estate in cities. Here on the East Coast we are experiencing a major influx of immigration from other parts of the country as these people no longer feel that they have to live in large cities close to their offices.

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Whats happened with office is akin to letting people who have been married for a decade plus start having open relationships. At first, March 2020, it was weird. But the longer it goes on the more normalized it becomes and after awhile, everyone gets comfortable, sees its doable, and many probably even like it better this way. IMO office is forever changed/past the point of no return and theres going to be long term effects to this that arent fully yet appreciated. 

 

Of course, there are still obviously people who like going to the office, and folks who like ordering around minions from their corner offices...but enough of the foundation has cracked that the industry is going to need to make the new model work. And it will be painful for those reliant on the old model.

 

At any given company there are probably only a handful of people important enough to be making the decision of whether workers have to be there or not. I dont want to play the game of guessing what theyre thinking, when they're thinking it, and in aggregate, when enough of them will get to the same conclusion. Given the situation in the labor market right now, they dont exactly have a lot of leverage and additionally having hiring flexibility via remote work may actually be more beneficial than sticking to the talent pool within 50 miles and competing with every other business in that radius as well. 

 

So you step back and its like...why would I buy an office REIT at a 5-6 cap when you can buy MF more or less in or around that same cap rate? Or SFH. Or industrial. Or grocery anchored shopping. There s a ton of shit thats good and will continue to work and then theres office, still stubbornly hanging in there on the cap rate side, so for me it s a pretty easy decision. 

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One would think that the overhead in eliminating or reducing a company's office space would be quite substantial. What is overlooked is the social aspect of not having people congregate in offices. For instance, how many people meet their future spouses at an office? However, society changes.

 

19 minutes ago, Gregmal said:

...but enough of the foundation has cracked that the industry is going to need to make the new model work. And it will be painful for those reliant on the old model.

What we are seeing today as Covid seems to be easing, is that these people have been working from home for almost two years are quitting rather then returning to the office. This may create a situation where employers have little choice but to allow employees to work from home if they want to retain talented workers.  

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13 hours ago, RedLion said:

I think APO is attractive at this price. Pro forma for the Athene acquisition, it is trading at less than 15x multiple of 2022 distributable earnings, which is downright cheap compared to BX, BAM, or KKR. 

 

APO has a great PE business, and is definitely leading the pack in the pension risk transfer / annuity business that all of the alternative asset managers are trying to get into now. 

 

I understand that a lot of these earnings are pro forma spread related earnings, and the market certainly values FRE higher, but to me this is a great quality company that is trading at a 25-30% discount to the market, closer to 35-50% discount to its peers in the alternative asset management space, and has laid out what I believe is a persuasive case for 15-20% growth in distributable earnings. 

 

The stock is trading at $74, and expects to do $5.50 in distributable earnings in 22. I feel that a $110 price target is reasonable based on a 20x multiple, and there should be 15%+ earnings growth over the next several years, so I think this can do well. 

 

Second APO.  I have been an APO holder for a number of years along with the other alts.  APO has moved up nicely, but lagged some others such as BX and ARES.  I think it has a lagged a bit because of the uncertainty surrounding the pivot caused by the Athene acquisition.  I was and still am a bit uncertain about the acquisition myself, but I think they laid out the case for it pretty well during the Investor Day.

 

As you point out, both somewhat cheap and growing nicely.  I think they'll grow earnings in the mid-teens percentages.  Should do pretty well even without a re-rate.  I also expect a bit of a re-rate.

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Asbury Automotive is my biggest position and the one I feel most comfortably with over a 3-5 year horizon. I also think it'll do well in 2022 as a strategy update in the beginning of the year should see them increase their LT targets, which probably puts them on a 4-6xPE for a +30 pct. ROE business with decades of DD EPS growth.

 

But to win this contest, something more explosive is probably needed.

 

I think Amyris is interesting - both due to fundamentals as well as technicals (company sold some equity 200 pct. higher earlier in the year, recently sold a convert and bought calls to limit dilution despite strike being 100 pct. above current price). A lot of retails smucks have gotten killed this year as well. Looking at Google trends, some of their new brands seems to have done well in Q4 after a very disappointing Q3, which company cited due to supply chain issues. Amyris is so far from what I usually do, but it seems there's a ton of ways to win both short term as well as longer term and after they raised the convert they've finally gotten their balance sheet in order. Nobody believes the CEO, who has always been overly optimistic, but John Doerr is no idiot and on the board (owns 40%), and if they get near 500m revenue and positive ebitda in 2022 - which is what they guide - I could see this thing explode. Their clean beauty brand Biosannance seems like a home-run. It looks great on Instagram, it's frontpage @ Sephora and the reviews on Amazon are glowing. You could argue 1B value versus a market cap of 1,6B, and then they have a ton of other stuff going on ("synthetic bio platform value", selling molecules/ingredients, covid vaccine, other consumers brands).

Edited by kab60
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I like CLMT for 2022, for the following three high-level reasons:

1. Upcoming deleveraging (and refinancing of remaining debt at better rates), made possible by the recent $300 million Oaktree investment.

2.  I think the expected cash flow from the Montana Renewables operation is not reflected in the current unit price. 
3.  The GP / founding families seem to have finally realized they are incompetent and appointed a CEO who appears competent, well-aligned with unit holders, and conveys a thoughtful strategy for the business.  
 

in addition to the above, I suspect some (or all) of the following are likely happen over the next few years, juicing the return further:

1. Expansion or Montana Renewables operation to produce sustainable/renewable aviation fuel.
2. Strategic sale of renewable diesel operation after it is up and running;

2. Conversion from partnership to c-Corp.  

 

happy to discuss more on a CLMT-specific thread if desired.


 

 

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I like Tier 2 and Tier 3 US cannabis stocks and CXXIF. My total portfolio that includes a roughly fifty percent holding in Berkshire was down 3% in 2021 after a huge gain in 2020.  Basically spent the last year investing in this segment, cannabis, while suffering from confirmation and anchoring bias! All my BRK/B gains went up in smoke!  Hope to do better next year by spending more time on this board. Happy New Year everyone! -willie

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On 12/27/2021 at 9:41 PM, Gregmal said:

Whats happened with office is akin to letting people who have been married for a decade plus start having open relationships. At first, March 2020, it was weird. But the longer it goes on the more normalized it becomes and after awhile, everyone gets comfortable, sees its doable, and many probably even like it better this way. IMO office is forever changed/past the point of no return and theres going to be long term effects to this that arent fully yet appreciated. 

 

Of course, there are still obviously people who like going to the office, and folks who like ordering around minions from their corner offices...but enough of the foundation has cracked that the industry is going to need to make the new model work. And it will be painful for those reliant on the old model.

 

At any given company there are probably only a handful of people important enough to be making the decision of whether workers have to be there or not. I dont want to play the game of guessing what theyre thinking, when they're thinking it, and in aggregate, when enough of them will get to the same conclusion. Given the situation in the labor market right now, they dont exactly have a lot of leverage and additionally having hiring flexibility via remote work may actually be more beneficial than sticking to the talent pool within 50 miles and competing with every other business in that radius as well. 

 

So you step back and its like...why would I buy an office REIT at a 5-6 cap when you can buy MF more or less in or around that same cap rate? Or SFH. Or industrial. Or grocery anchored shopping. There s a ton of shit thats good and will continue to work and then theres office, still stubbornly hanging in there on the cap rate side, so for me it s a pretty easy decision. 

 

Not factored in here are the severance savings in relocating the office.

It used to be that if you acquired a company, resulting in staff having to travel > an additional 40km to get to work, you had constructively dismissed them. You had to give the acquired staff a severance (whether you wanted to or not), and the total amount could get very big, very quickly. If the acquired staff chose to move, you had to hire them as new employees as well as give them credit for their prior service in the acquired company. 

 

Today we don't have this issue, if you have a virtual office, or work from home 3 days or more per week. You are little different to the travelling salesperson responsible for a sales territory - as long as the 'new' office is primarily 'on the road' and your are still responsible for the same territory, there has not been enough change to warrant 'constructive dismissal'. Similarly, if you work from home 2 days/week ... as the office moved to you.

 

If you're looking for savings, and have a large footprint .... WFH has a lot of advantages. If you want to sell me office space, I want a multiple of these severance savings off the rent, and I want them sooner vs later. I also want compensation for the spend of my returned employees in your food-court, from which you are charging local vendors a higher rent. On a new lease ... very low near term rents, subject to long-term rent escalators, and a minor termination penalty for early release.

 

Not good for office REITs. 

 

SD

Edited by SharperDingaan
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With this administration throwing trillions around every year, cheap 30 yr fixed non-recourse mortgage with just 25% down, there is no doubt that the best investment idea for 2022-2024 at least is to buy rental houses. I don't think 99.9% stock pickers could beat an average real estate investor in 2022-2024.

You need to understand your submarket though.

 

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Probably shouldn't listen to anything I say since I fell way short of the triple digit returns I'm seeing all over the place.  However, I'm positioning myself for 2022 in oil\natural gas and gold\silver in various ways.  Gold and silver still feels like a forgotten asset class left behind\obsoleted by Bitcoin.  It seems like a lot of people are left wondering why gold isn't "working".  Parts of these positions worked in 2021, but not the home run.

 

 

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I think stuff like TPB could do very well. Seems like a good play to get into weed without getting into the weeds.

 

From the tech sectors (if you call it like this), I like PINS. They have issues with user engagement but I think the changes that they do to make the platform more shop able are going to improve ARPU and the stock in some ways it cheaper than it was pre-COVID-19. TWTR is a dark horse here. - the platform has engagement but has never been able to make money. Maybe the new CEO is going to make a difference, but it’s hard to tell.

 

For economy sensitive plays, I think car/ truck suppliers here are worth a look. They are not great business, and have been hit hard by first COVID-19 and then the semi shortage . Unlike car dealers or the car companies themselves, they have not benefited from firm pricing and truly got her short end of the stick. I expect the semis shortage to go away and the higher volumes should lead to a rebound in earnings. Inflation is a risk thing, because gross margins are thin, so even if they eat a little margin, it hurts.

 

A but better may be some packaging plays. BERY is one I own, but have been looking at WRK as well. It seems cheap and their gross margins have been quite stable recently which indicates rational competition.

 

As a restructuring play, like DISCK . I have a smallish to medium (for me) position , but depending on how this works out, I will make it a full position in 2022. The valuation is compelling and I think HBO and TW studios are great assets and with Malone being on board, there is a large owners who cares about the stock price

 

I own TPB and PINS a d BERY and seriously thinking about buying some car suppliers (maybe a basket of them )  and WRK.

 

I have decided in 2014/15 to leave the commodity space alone for the most part. I just don’t like price taker companies and have no clue where commodities are going. I have been much happier since I left this sector along. If I were to invest in something it would be behemoth like BBL which has a cost advantaged position and pays out a lot of cash and there is no cartel that determines the supply and hence price.

Edited by Spekulatius
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