Investing in Free Cash Flow Commodity Businesses
We choose to focus on the firms where we see better returns on capital. Mileura is looking to invest in opportunities more sustainable margins and strong customer relationships. We believe there are opportunities in this space that are either too small or too complicated for larger conglomerates where we can help the business grow and deliver superior returns for our partners.
Successful strategies in commodity trading and supply chain management have often taken two paths to success. Either the business needs to operate at scale, usually with a global presence with significant market share. Alternatively, they remain smaller operate in a market niche that the large players cannot exploit. One exploits economies of scale, the other focuses on margins and customer relationships.
Mileura is looking to invest in opportunities that have reduced competition, more sustainable margins with strong customer relationships that deliver a more stable revenue stream and a better product. We believe there are many opportunities in this space, that are either too small or too complicated for larger conglomerates to focus on, that offer strong free cash flow and the potential to grow.
Being involved in commodity markets for nearly 20 years we see that commodity markets are cyclical and mean reverting.
This periodically provides opportunities to allocate capital on a more tactical basis to these strategies. We see these as high ROE, riskier strategies that only suit certain participants and require comfort with higher levels of volatility.