Adrian Day: Increasing Oil Exposure, The Most Undervalued Resource Stocks & Gold

Finance-Focused Summary (Markets, Investing, Macro, Valuations, Recommendations)

Macro / Commodities Backdrop: Oil Supply Disruption + Underinvestment

• The core theme is the largest commodity supply-flow disruption in history, linked to the Strait of Hormuz.
• Near-term oil risk: Oil has been trading down on news of a potential peace deal. However, energy experts suggest that normalization/reopening could take ~4–6 months after reopening.

Base vs. Bull Oil Framing (with explicit level)

• Adrian Day avoids precise forecasts, but offers a benchmark:
  • “If oil were firmly and consistently over $150” → base case
  • The time horizon is suggested as ~1–2 to 3 years (with uncertainty).

Why Oil Could Rally Longer-Term

• Oil is described as “hated” and “underinvested” for ~10 years, with governments pushing against fossil fuels.
• Historical pattern: new major oil sources have periodically replaced declines.
• He argues US shale growth has peaked and is rolling over (not an immediate collapse, but loss of growth).
• Demand assumption: absent recession, oil demand continues growing ~2–3% per year.
• Supply growth uncertainty: the next major supply source is unclear.
  • He also suggests OPEC may be losing the ability to control prices (cartel success is tied to the “power to control the market”).
• Strategic reserve angle: after oil resumes flowing, countries/companies are expected to rebuild strategic reserves (e.g., Europe and others), which could support prices.

Near-Term Tactical Suggestion (how to time stock entries)

• He implies waiting for additional weakness in oil-related equities if a peace deal drives further oil-stock declines.
• Behavioral pattern noted: oil stocks often drop on “deal imminent” headlines (e.g., “Trump tweets”), creating sentiment-driven drawdowns that can become entry points.

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Oil Producers: Valuations + What to Buy (and What to Avoid)

• Valuation stance: oil producer valuations are “reasonable… attractive but not screaming buys.”

Why it doesn’t feel “cheap”

• A factor in the prior year: the market may have supported oil stocks via dividends and buybacks, while many pension funds avoid oil exposure.

Risk management filter

• Investors should ensure the company has a strong balance sheet to withstand further downside.

If oil sentiment turns (deal + oil price drop)

• He expects oil stocks to drop more than the oil price (“exaggerated drop”).
• He views this as a potential opportunity, especially for big integrated companies.

Oil price dip expectations (levels and horizon)

• He recognizes the possibility of oil dipping:
  • mentions oil down to ~90 or 85
  • personal target: ~75
• He also says he doesn’t think it lasts long.

Where he sees selective value outside “dividends/buybacks-only”

• He’s cautious: he does not see “bargains” broadly in LPs.

Example: Dorchester Minerals (DN)

• Mentioned for a dividend yield > 9%
• Caution: yields may be misleading due to variable distributions (described as “big one and small one”).
• Bloomberg projection cited at ~6%, with a clarification that it may refer only to interim payouts.

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Fertilizers / Agriculture: Selective Opportunity via Royalties + Execution / Capex Drag

• He prefers not to chase smaller, overly narrow fertilizer “pure play” disruptions (e.g., “pure helium… pure lithium” style bets).
• Altus Royalties
  • Highlights Altus benefiting from royalties on potash in Saskatchewan.
  • Nutrien is expected to expand production, which should benefit royalties without requiring Altus to contribute capex.
  • Framed as solid/core due to discipline in cyclical exposure (not a “screaming buy”).

Fertilizer names as input-cost linkage (Mosaic and Nutrien)

• Mosaic (MS) and Nutrien:
  • sulfur inputs (Mosaic) are “hard to get,” creating mixed near-term effects.
• He suggests Nutrien’s large capex plans could be a near-term drag on the stock, even if fundamentals improve later.

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Copper + Uranium + Broader Resources: Medium-Term Attractive but Conditional

• Copper: “attractive on a 3–5 year basis,” but with risk that China slows demand.
• Uranium and other commodities: he suggests there are “good buys,” but not “screaming buys.”
• Relative leadership over the cycle:
  • He expects later outperformance by uranium stocks.
  • Outlook: 5–7 years, with a progression where oil/copper outperform first, then uranium.

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Gold + Gold/Silver Stocks: Central Bank Demand + Positioning + Valuation Metrics

Gold price context

• Gold cited as consolidating:
  • peaked around ~$5,600/oz in January
  • currently around ~$4,500/oz

Core bull factors

• Central banks increased aggregate net buying in Q1 vs Q4.
• Notable selling mentioned:
  • Turkey and Russia selling (example: ~60 tons in ~two weeks plus another 60 tons in a swap; counterparty unknown)
  • additional liquidity stress / selling referenced (e.g., Poland/Russia in the discussion)
• Central bank and “Tether” buying is framed as strategic and relatively price-agnostic (not “bargain hunting”).

Macro narrative: why rates may not crush gold for long

• Near-term narrative: war + oil → higher inflation → higher rates → bearish for gold.
• Counterpoint: markets price ahead; rate hikes often may not outrun inflation quickly enough.
• If the war ends, he expects:
  • oil falls → inflation pressure eases
  • Fed cuts become possible (he references Treasury Secretary claims and expectations around Fed policy)

Gold allocation guidance (explicit portfolio action)

• If already heavily allocated to gold:
  • If clients started around ~25% gold and now sit at ~40–45%, he suggests trimming (not rushing to add).
• If underallocated / new buyers:
  • suggests a potentially large initial allocation: 50–60–70%
  • while still keeping some cash reserve in case of further decline.

Specific “value” metrics for gold equities / royalties

• A gold-related equity appears as “Endeavour? / Aigo” (likely a transcription issue).
  • “Favorite metric” cited: Price to Free Cash Flow
  • framed as selling at a lower price to free cash flow today than for the last 10 years
  • trading within ~10% of its lowest price-to-FCF in 40 years
• Franco-Nevada
  • selling below its average price to cash flows
  • described as favorable on price-to-earnings / price-to-(even?) (subtitles unclear)
  • “on a price to NAV” within ~20% of all-time range
  • overall framing: value attractive, not necessarily “cheap on headline price.”

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Relative Performance / Diversification Rotation Thesis

• He argues foreign / non-US markets have outperformed the US recently, and rotation out of big US tech into value/laggards may continue.
• Gold/commodity stocks are viewed as extremely underperformed vs US equities, described as near 100-year lows in relative performance.
• Illustration cited:
  • global/non-US markets would need to outperform by ~25% per year for 5 years to recover to a prior cycle-low level—used to emphasize how stretched relative underperformance is.

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Gold Miners and Sector Construction: Diversify Across Caps + Juniors (Financing Checks)

• He likes value across the gold complex:
  • big miners
  • big royalty companies
  • junior miners
  • exploration companies
• GDX / GDXJ: expects flows back when gold resumes and institutional money returns.
• Junior selection rule: verify the company can raise financing.
  • He views it positively if top shareholders include well-known investors (mentions Rick Rule and Ross Beaty, plus others from subtitles).

Example mid-caps / names

• B2Gold (B2)
  • described as “turning the corner”
  • notes issues (Yukon/Mali) and claims Goosebay running properly
  • “good balance sheet”
• Equinox Gold
  • references an announced no-premium merger
  • called “incredible,” but the market sold off due to:
    • weakness in gold
    • investor overconcentration concerns (owning both companies)
• Fortuna Silver: mentioned as undervalued (midcap)

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Takeover Model: “Icing on the Cake,” Not the Core Thesis

• He’s not primarily driven by takeover targets.
• Core idea: he buys because it’s cheap, has a plan, and is executing—takeover potential is secondary.
• He notes large companies often wait for projects to de-risk (permits, social license, local acceptance) and fit into pipelines.
• An “obvious exception” is mentioned: takeover of Orion (company naming likely garbled in subtitles).

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Silver Positioning

• He analyzes gold and silver miners as a group, not purely “silver-only.”
• Pan American Silver
  • framed as mostly gold exposure:
    • last year silver was ~18% of revenue
    • after buying MAG: silver leverage increases to ~22%
  • additional silver leverage depends on projects:
    • S“can deposit” in Mexico
    • Escu?al deposit in Guatemala (on hold pending licenses)
• Conclusion: silver miners are not portrayed as particularly undervalued relative to comparable gold companies right now.

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Other Disliked Sectors Becoming Less Hated: Coal

• Coal is described as “about the only thing that is hated,” especially in Europe/North America.
• He says coal is not so hated anymore, especially in parts of Asia.
• Strait of Hormuz linkage: supply disruption can increase certainty-of-supply focus.
  • Coal may benefit in energy security for some countries as they fear shortfalls in oil/gas and fertilizer inputs.
• Mentions demand/plan increases by countries including China, Japan, Thailand, Indonesia, Vietnam.
• Caveat: he’s less convinced North America/Europe pricing will translate from Asia supply stories.
  • Germany restarting coal mines is mentioned as plausible.
• He suggests disruption-driven support could last ~3–5 years, after which people may “forget.”

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Commodity “Supercycle” Stance (Definition + Leadership Order)

• He defines “supercycle” as requiring new demand sources (e.g., industrialization waves).
• He argues commodities are extremely cheap vs history:
  • commodity stocks underweight
  • oil around ~3% of S&P vs average ~13% cited
• He expects higher prices over 3–5/10 years, but emphasizes volatility inside the cycle.

Leadership order he suggests

• Early cycle: gold leaders
• Middle: oil and other commodities tend to lead

• End: gold and silver again

• Risk-reward note: even if gold isn’t the top performer next, it remains the best commodity to buy on a risk-reward basis among resources.

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Step-by-Step / Framework Elements Mentioned

Oil / Commodity Investing Framework (implicit)

• Identify commodity themes: underinvestment/hate + supply disruption
• Model demand growth (oil: ~2–3%/yr absent recession)
• Assess supply growth uncertainty:
  • US shale peak/rollover
  • OPEC capacity/control
  • unclear next supply source
• Stock timing: wait for sentiment-driven drawdowns tied to headlines (e.g., peace-deal updates)
• Balance sheet strength as a primary stock filter for producers

Gold Portfolio Construction Framework (explicit)

• Set target vs current gold allocation (example: 25% start → 40–45% now)
• If above target: trim
• If underallocated/new:
  • consider 50–70% gold allocation
  • keep cash reserve for further downside
• Valuation emphasis:
  • prefer metrics like Price-to-Free-Cash-Flow for certain royalty/gold equities
  • emphasize “value” over headline price

Junior Miner Selection Risk Framework (explicit)

• Check the ability to raise financing
• Look for credible strategic/large shareholders to infer access to capital if needed

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Key Tickers / Instruments / Assets Mentioned

Equities / Funds

• GDX (gold miners ETF)
• GDXJ (junior gold miners ETF)
• Nvidia (US big-tech example)
• Nestlé (non-US large multinational example)
• Pan American Silver
• Franco-Nevada
• Equinox Gold
• B2Gold
• Fortuna Silver
• Orion (takeover context; full name unclear)
• Dorchester Minerals (DN) (LP example)

Energy / Commodities Levels

• Oil levels referenced: $60, $94, $100, $150, 90–85, 75
• Gold levels referenced: ~$5,600/oz (January peak), ~$4,500/oz (current)

Corporate / Asset Vehicles

• Palisades Gold Corp (ticker cited as PAI; ticker/name may be garbled in subtitles)
• “Made in America Gold Corp” (subsidiary mention; not clearly a ticker)

Royalty / Fertilizer-Linked Names

• Altus Royalties (Altus)
• Nutrien
• Mosaic (MS)
• MAG (acquisition affecting Pan American Silver’s mix)
• Saskatchewan potash royalties (no ticker specified)

Unclear / Garbled Names

• “Aigo” (appears to be a gold-related equity; likely mis-transcribed)
• “Tether” (described as a buyer; likely referring to Tether or another entity in the context)

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Explicit Recommendations / Cautions

• Oil equities
  • Don’t chase immediately on peace headlines.
  • Expect exaggerated drops and potentially look for entries after additional weakness.
  • Favor companies with strong balance sheets.
• Gold allocation
  • If near/above target: trim, don’t add aggressively.
  • If underallocated: consider 50–70% gold with a cash reserve.
• Value discipline
  • Avoid “screaming buy” expectations; stance is reasonable/attractive, not guaranteed upside.
• Juniors
  • Ensure ability to raise financing—otherwise dilution/capital risk dominates.

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Disclosures / Disclaimers (Gist)

• Podcast disclaimer: general information only and not investment advice.
• Host/guest views may not reflect those of the company/affiliates; no compensation; forward-looking statements carry risks.
• Advice: do your own research and consult a licensed financial advisor; don’t rely solely on podcast content.
• Full disclaimer referenced at cedarplus.ca and on the website.

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Presenters / Sources Mentioned

• Adrian Day — Financial analyst; founder, Adrien Day Asset Management
• Art Burman — referenced as an energy expert (name mentioned)
• Jeff Curry — referenced (commodity supercycle discussion)
• Palisades Gold Radio host/segment (host not explicitly named)
• Promotional sponsor: Palisades Gold Corp (ticker cited as PAI in subtitles)
• Bloomberg — cited for a projected LP yield figure (distribution projection)