Catching the PGM Wave

From overlooked metals to market leaders — why this story is far from over

At the beginning of last year, I wrote about platinum group metals (PGMs) and highlighted what I believed to be an extraordinary investment opportunity on the horizon. To further validate the thesis, I travelled to Shanghai to attend the largest PGM-focused conference in the Eastern Hemisphere — a gathering of the industry's top producers, traders, analysts, and policymakers. What I saw and heard there confirmed my conviction: the fundamentals were not only sound, but the market was dramatically mispricing what lay ahead.

In March 2024, I communicated this view clearly to our investors. In a formal letter, I explained that we had made the strategic decision to pivot the fund toward PGMs, given the compelling risk-reward profile and the structural imbalances we observed in supply and demand. Around the same time, I was also invited to speak with the highly respected publication Grant’s Interest Rate Observer, where I discussed our PGM thesis in depth.

Fast forward to today, and the results speak for themselves. PGMs have become the best-performing asset class of the year, or, at least, one of the best. Stocks in the space have surged dramatically, with some names up between 45% and over 100%. What was once a contrarian call has quickly become one of the most rewarding positions in the market.

What began as a bold allocation — grounded in deep fundamental research and reinforced by direct, on-the-ground due diligence — has since delivered outsized returns, affirming our conviction in the PGM thesis. And importantly, we believe the runway is far from over.

To illustrate the structural imbalance in the market, I’ve included the chart below, courtesy of SFA-Oxford, which clearly shows the growing supply deficit in the PGM space. This isn’t just a short-term squeeze; it’s a multi-year dynamic driven by underinvestment on the supply side and shifting patterns of demand that the market had largely ignored.

At the time we initiated our position, the prevailing narrative was heavily focused on the rise of electric vehicles (EVs) — with many forecasting a steep and immediate decline in internal combustion engine (ICE) vehicle sales. That narrative, however, overlooked several key realities.

In our view, and as I wrote then, this outlook was not only improbable, but overly simplistic. Most notably, it ignored the accelerating adoption of hybrid vehicles, which, due to their dual powertrains, actually require more PGMs per unit than traditional ICE cars.

In March 2024, I shared a detailed letter with our investors outlining this view — you’ll find the link below. Although it’s written in Portuguese, it should translate easily for anyone interested in the full context: https://www.l2capital.com.br/carta-trimestral-marco-2024/

As Jim Grant famously put it, successful investing is having everyone agree with you — later. That’s exactly what I’ve aimed to do.