The Cro Capital Report

Good morning, and welcome to another edition of The Cro Capital Report, your go-to source for market analysis, energy trends, and our portfolio strategy.

Month-over-month economic Indicators (End of August - Sept. 25, 2025)

Portfolio Performance Update: Outcomes We Couldn’t Script Better

Cro Capital has delivered an exceptional two weeks, with portfolio returns now standing at +20.18% year-to-date, significantly ahead of the S&P 500 (+12.54%). This strong performance has been driven primarily by the remarkable rally in Fluence Energy (FLNC), which has quickly become one of our standout holdings.

FLNC, our renewable energy storage investment introduced in last week’s newsletter, has already produced a +71.8% return. We initiated a 10.6% allocation at $6.83, and the position recently traded as high as $12.04 before settling at $11.73. While we were confident in FLNC as a long-term opportunity, the magnitude and speed of this move has exceeded expectations and is a key driver of our ~8% outperformance versus the S&P 500, an index historically difficult to beat, even for top active managers.

Meanwhile, REEMF, our Wyoming-based rare earth element extraction play, has continued to lag despite strong structural tailwinds as the U.S. seeks to reduce reliance on China in this critical sector. We increased our position earlier this week at $0.86, and shares have since moved to $0.92. Though the pace of progress has been slower, our conviction remains high that the company will benefit meaningfully from these long-term trends.

We remain humble in the face of recent success, knowing that markets can be unpredictable. Nonetheless, we are proud of the disciplined process that has driven our performance and continue to actively monitor the portfolio each day, seeking opportunities to minimize risk and maximize returns.

Uranium’s Defense Industry Moment: Why UEC May Lead a Wave of Consolidation

In the 1990s, the defense contracting industry experienced a phase of strategic consolidation. Back then, the U.S. Department of Defense encouraged mergers to streamline operations and ensure national security during a period of budget tightening. Today, similar forces are at play in uranium: geopolitical tensions, supply chain vulnerabilities, and a renewed push for energy independence are driving companies to scale vertically and horizontally. This fuels our belief that the uranium industry is poised for a similar consolidation defense contractors experienced in the 1990s.

We see consolidation beginning with our high conviction pure play uranium mining company, Uranium Energy Corp (UEC). UEC recently announced the launch of United States Uranium Refining & Conversion Corp (UR&C), a wholly owned subsidiary aimed at building a state-of-the-art domestic facility for uranium refining and conversion. This would make UEC the first fully integrated American uranium company. This initiative directly addresses the uranium supply bottlenecks, where conversion capacity is limited and largely dependent on foreign sources.

To refine uranium by removing impurities and convert it into a gaseous state suitable for enrichment, you first need uranium itself. What better way to secure this supply without paying spot premiums or hedging contracts than to acquire a major domestic producer? Enter Ur- Energy, operator of the Lost Creek mine. According to Ur-Energy, this mine “produced significantly more uranium in each quarter than any other mine in the US from Q3 2024 through the last reporting period of Q3 2024”. For UEC, acquiring Ur-Energy would be a logical next step aimed at securing the feedstock for its refining subsidiary while expanding its mining footprint. It’s a move that mirrors how defense contractors acquired smaller firms to gain access to specialized capabilities and secure long-term contracts.

Cracks in the Mortgage Market: Is 2025 Echoing 2008?

As of Q2 2025, the early stages of mortgage delinquencies are rising faster than any other consumer credit class. While the overall delinquency rates remain mostly moderate at 1.79% for single-family loans and 3.93% for all mortgage types, the behavioral signals are all blinking red. FHA loans, which are government-backed mortgages, now account for over 50% of serious delinquencies, and even for prime borrowers, are showing signs of strain.

Three key points are driving this fragility:

Interest Rate Fatigue, Saving Depletion, and Affordability Metrics

Interest rate fatigue is hurting homeowners with maintaining their house with rising insurance rates, taxes, and variable-rate resets. During the Pandemic, the government subsidized Americans with capital, and we have seen that evaporating, leaving households exposed to financial risk. And Affordability metrics are at a crisis level with mortgage payments that are consuming 35% of median income. All of these forces are coming together and resulting in early-stage delinquencies, widening mortgage-backed-securities spreads, and the credit market is showing deeper stress but moving quietly.

Mortgage-backed securities are showing signs, with spreads remaining wide with 150bps over treasuries, which shows us weak investor demand and poor secondary market support.

There is a rise in early delinquencies that mirrors the overlooked warning signs of 2006-2007, with household buffers gone and affordability with homes stretched, there are deep signs of systemic strain.

Thanks for reading The Cro Capital Report.
— The Cro Capital Team

*The information provided in The Cro Capital Report is for informational and educational purposes only and should not be construed as investment advice, a recommendation, or an offer to buy or sell any securities. The views expressed are those of Cro Capital and are subject to change at any time without notice. While we strive to ensure accuracy, we make no representations or warranties as to the completeness or reliability of the content. Always do your own research and consult with a licensed financial advisor before making any investment decisions. Investing involves risk, including the potential loss of principal.