MEP Portfolio Update 7.7.26
Folks,
I want to walk you through how I’m actually building this book, because the specific selections and allocations aren't nearly all there is to it – Of course, one must time entries and exits well, but the overall structure is just as critical.
There were three initial positions I wanted to establish. Two of these positions have already been started and the third will be executed, I'm pretty sure, some time later this week. Each was picked to do a different job in the current market.
The first is tactical: crude. Front-month oil has round-tripped all the way back to around $70 — the same sleepy range we sat in through the boredom of 2024 and 2025 — and it’s mispriced against a market that is physically tighter than the tape wants to admit. This is the leg with a clock on it. I expect it to work over the next few months, and likely we'll get a better indication right before the August futures contract goes off the board in the next week and a half.
The second is structural: natural gas — levered to LNG out the Gulf and electricity for AI data centers, a story that is only getting started and runs for years. This is the leg I’m willing to sit in and let compound. This is likely (although never say never) going to be the core of the core of the portfolio.
The third is also an LNG and AI play — but from a different quadrant, more beta-intensive — a direct beneficiary of the pay-on-demand power that’s only starting to show up in long-term forward contracts with the "Hyperscalers".
Now here’s the part that matters, and the reason I’m laying all three out side by side to you as the opening salvos of the book.
The market is expensive. The S&P is trading at 22.2 times forward earnings — above its five-year average, above its ten-year average, at historic highs, priced for a great many things to keep going right. That is the multiple the entire index is asking you to pay today.
My three legs are not priced like that. Nor will anything but the most short-term and tactically focused trades be, either, going forward.
On an equal-weight basis, these three sit at about a 15x forward P/E average while the S&P sits at 22.2x. All have seen massively higher share prices in the last 12 months (I love catching hype stories on the round-trip rebound, when the impatient players have already been fleeced and have fled).
Which brings me to the thing I most want you to hear.
If the market’s multiple contracts — that is, if stocks start going down decisively — we will not be immune. No one will be. When the tide goes out, it pulls on everything. But this book, built on 10-to-12-times-earnings assets is a very different thing to hold through that than the general market's 22-times index, especially in the even higher multiple sub-sectors of chips and other tech. We should bleed less, and we should bleed slower. That’s what long-term staying power is all about — and it’s the portfolio we are committed to building… slowly.
And we are not fully invested — on purpose. I’m carrying a lot of cash right now, and I’m carrying it deliberately. Not because I’m timid, but because the best thing you can own heading into a downdraft is dry powder and a shopping list. If the market hands us lower multiples, I don’t want to be a victim of the move — I want to be a buyer into it. That is the entire reason the cash is sitting there.
That’s the quick update on the first week of the MEP portfolio. We’re just getting started. If you’re not a subscriber, I will tell you that all three positions have begun to move — and this could be the last stop before the train decisively leaves the station.
https://dandicker.com/
dan@dandicker.com
