Subversive Capital Portfolio Manager Christian Cooper joins Yahoo Finance Live to discuss macro global risks that markets haven’t fully priced in, decarbonization ETFs, top investing themes for 2023, and why he’s shorting Meta.
Video Transcript
BRIAN SOZZI: All right, we are tracking two new ETFs that just launched with a climate angle. The first is the Subversive Decarbonization ETF, and the other is the Subversive Food Security ETF. Let's talk more about both with Christian Cooper, a portfolio manager at Subversive Capital. Good to see you here this morning. Why launch these now?
CHRISTIAN COOPER: Well, it's an interesting time in the world, to be frank. We have-- I think the real trade of 2023 is going to be, with respect to DKRB, trading rich dollars for cheap fertilizer. And what I mean by that is we have a war in Europe. We have the bread baskets of the world are fighting. And you can really use those dollars, the appreciated dollar, to acquire some of those cheap global assets around a trade of-- around a PE of around 7 or 8. So I really do think that's going to be one of the more important trades of 2023. But all of these kind of fit within the same geopolitical theme.
BRAD SMITH: And so one of the sectors within this-- and I was looking at your sector breakdown-- that really stuck out was the agricultural inputs. And how do you really kind of evaluate and qualify some of the companies that you look across within that subsector?
CHRISTIAN COOPER: It's really interesting if you look back at what happened during the Arab Spring. And that is kind of our model for how the world of food is going to behave going into the next year, especially if we see negotiations break down between Russia and Ukraine, if this drags out for another year. So we have built the portfolio to acquire cheap assets within the fertilizer space and then build on top of that. What does the food chain look like? What are the vertically integrated companies that we like in that space that are going to offer real value?
Because as we all know, what's not the best idea is the best trade, right? There's still-- these companies still have to trade well. And I am worried about valuations going into 2023. I am worried about the front end of the yield curve. And so as I look for value, that's the best place to find it, I think.
BRIAN SOZZI: Christian, I just want to make this as simple as possible to our viewers and the investors on our platform. So this, the food ETF, is that another way-- is there another way to look at it? This is a play on things just in the world going to hell in a handbasket next year?
CHRISTIAN COOPER: Well, it is a nice rally underway to this morning, but I'm not certain it is going to last. And I do believe that there are challenges and risks to the world that are not being priced. And food security is one way to hide, for lack of a better word. Taiwan has just increased their military service from four months to one year.
You can train someone to use a mop in the bucket for months. You can train them to do a lot more in a year, right? There are remilitarizations in Germany and Japan that are probably going to define the next decade. So hell in a handbasket, I hope not. But preparing for the worst and looking and using those rich dollars now to buy those cheap assets, I think that's really the key to what we're trying to express with this fund.
BRIAN SOZZI: And then going back to the DKRB one, Tesla shares have been in a lot of climate-friendly ETFs. And considering how the valuation has come so far down this year on the name, any interest in adding Tesla?
CHRISTIAN COOPER: No. No interest in having Tesla, mostly on an evaluation basis. And I think it's well managed. I think their technology is-- the technology is great. On a valuation basis, I just can't. As a portfolio manager, am I going to own Tesla at the expense of the entire rest of the industrial-- the automotive sector? And I think there is a bit of a meme behavior there that, in my mind, is not justified. So I want to see-- and also not to belabor the point, but to get back to the China risk, I think this is not inconsequential going into 2023. And I think there are geopolitical risks that are not being priced into Tesla at the moment.
BRAD SMITH: You also have an ETF that's shorting Meta, and I assume, as a part of that, the Metaverse, which there's been so much capital that has really been thrust towards making that reality real. But there's so much still that has yet to come in the terms of development, in the terms of the number of users that are going to be necessary for it to be profitable in the future as well. And so walk us into your thesis there.
CHRISTIAN COOPER: I fundamentally believe that Facebook has missed what the Metaverse does, right? Like, if we think about what is next for the internet, it is about identity. It is about ownership. Some elements of that are in Web3 and are fairly well known. It is not what we have all seen, though, with this cartoonish imagining of a conference room, right? That's not where kind of value is going to be created in this space. So that was the first idea of the short.
But the second idea is, OK, where are we going to see value? If you think about your phone and how you interact with your phone, especially the haptics, right, that little subtle feedback mechanism that we're all used to now, that still exists-- that also exists in the industrial scale, right? If you look at [INAUDIBLE], one of our top holdings in [INAUDIBLE], it is looking at how do we can get the industrial supply chain in to communicate with our devices? And there's every type of testing mechanism that is-- that they are working on.
So I just don't think Facebook is making the right bet. And they seem to be committed to spending billions more on this bet. And they're also going to take a hit on where the front end of the yield curve goes into 2023. It's just going to be a tough time for-- and we'll remain short into next year.
BRAD SMITH: Subversive Capital portfolio manager Christian Cooper, thanks so much for joining us here this morning. Interesting conversation and some components that we're going to have to track going into next year as well and beyond, quite frankly.