FFM Fund Newsletter - Apr 2026

April 2026

Dear Friends, Dear Investors,

It has now been several weeks since what is now being called the Third Gulf War plunged markets into deep uncertainty. The central issue is the near-complete blockade of the Strait of Hormuz. Taking into account alternative routes and strategic reserve releases by G7 countries, the net supply deficit stands at around 7 million barrels per day — a massive constraint for the global economy. Even if hostilities were to cease immediately, three to six months would be needed to normalize flows. Beyond oil, it is also natural gas and its derivatives — urea, fertilizers, sulfuric acid — that are now in short supply, with lasting repercussions across global supply chains.

An oil crisis is fundamentally different from a financial crisis. In 2008, central banks were able to print money to stabilize the system. You cannot print barrels of oil. The global economy has depended on petrochemicals for 120 years. In 2020, when almost no one was driving or flying, the world was still consuming 83 million barrels per day out of the usual 100 million. That illustrates just how central energy is to every economic activity. Our historical reference remains 1973 and the oil embargo that followed the Yom Kippur War, during which US equity indices fell by 45%.

As mentioned in our last Newsletter, we began buying energy stocks across all portfolios as early as the end of last year, without having anticipated events in Iran. Our reasoning was more fundamental: the sector had suffered from massive underinvestment over the past decade, valuations were attractive, and these companies remained profitable at $55 per barrel. We anticipated a gradual rise toward $150 over a five-to-ten-year horizon. Reaching $100 in three months was not our scenario, and this overly abrupt move is probably only partially positive for our energy investments, even if the long-term trend is clearly identified.

Our current strategy is to analyze each position to identify those that hold up best — whatever form the resolution of this crisis may take — to reinforce our highest-conviction holdings and reduce the weakest. This approach is fully consistent with our long-standing investment philosophy: investing in sector leaders with high margins, low debt, and superior reinvestment capacity, capable of creating value over the long term regardless of short-term turbulence.

In this context, we have begun reducing certain positions in technology — notably Amazon and Microsoft — in order to increase our exposure to energy. Markets appear to be betting on an inevitable reopening of the Strait of Hormuz. We do not claim to be smarter than the market, but we remain vigilant and do not believe moving entirely to cash is the right course of action. Our deep conviction remains: the artificial intelligence bubble, which today represents approximately 40% of the S&P 500, will eventually burst. Against this backdrop, companies like ExxonMobil — whose share price rose 400% between 1973 and 1980 while the S&P 500 stagnated — represent a genuine and durable diversification alternative. 

Best regards,

Your CaridaB Group Team