Reports Mailed to Shareholders (registered Investment Company) (n-30b-2)
27 April 2022 - 08:23PM
Edgar (US Regulatory)
ADAMS
NATURAL
RESOURCES FUND
GET THE LATEST NEWS AND
INFORMATION
Dear Fellow Shareholders,
A lot of things have impacted financial markets since the beginning
of 2022. Investors entered the year worried about inflationary
pressures not experienced since the 1980s. Inflation has only run
hotter since. All eyes were on the U.S. Federal Reserve (Fed) and
how it would use interest rate increases to tackle inflation. Those
began in March, offering some amount of clarity. Still, investors
are struggling to discern the pace of policy tightening and its
impact on economic growth. The beginning of the year also brought
new fears of an omicron variant of COVID-19. The pandemic is still
here, if somewhat in the background, but its ultimate path remains
unclear. Adding to all the uncertainty, Russia invaded Ukraine,
beginning Europe’s largest military conflict since World War
II.
“Energy was the best performing sector in the S&P 500 during
the first quarter, rising 39.0%...”
The war exacerbated inflation. Both Russia and Ukraine are
important providers of oil and gas, metals, wheat, and other
commodities. Crude prices rose sharply during the quarter, briefly
surpassing 2008’s peak and helping to lift the price of gasoline to
all-time highs. Led by energy and food, the U.S. consumer price
index rose to an 8.5% annual rate in March, its fastest climb in 40
years.
On March 16, the Fed raised its key rate by 25 basis points and
signaled additional hikes for all six remaining policy meetings in
2022, plus more in 2023. Fed Chair Jerome Powell and other
policymakers indicated that more aggressive interest rate
increases, including some in 50 basis point increments, are on the
table. The Fed also said it would end its pandemic-inspired bond
purchase program and start to shrink its balance sheet as soon as
the second quarter.
Energy was the best performing sector in the S&P 500 during the
first quarter, rising 39.0% and outperforming the index by 43.6%.
The sector benefited from sharply rising oil prices, with West
Texas Intermediate (WTI) crude prices rising by 33% during the
quarter, amid strong demand, low inventory, and supply shocks from
the war. WTI reached a 13-year high in early March, before
declining late in the quarter as the U.S. and other members of the
International Energy Agency (IEA) announced plans to release
emergency reserves. The fall in oil prices in late March also
reflected some concern about the pace of global economic growth in
the face of multiple uncertainties. However, the IEA’s
forecast—average WTI prices of $112 per barrel in the second
quarter and over $100 for 2022—remains very supportive for energy
companies.
Letter to Shareholders (continued)
The global
commodities complex posted its biggest quarterly gain in three
decades as the Refinitiv/CoreCommodity CRB Index gained 27.0% for
the three-month period, lifting its one-year price return to 59.6%.
Beyond energy commodities, the war and sanctions drove up prices of
industrial metals and agricultural products, especially those with
supply chains tied to Russia and Ukraine. This led to a wide range
of outcomes in the Materials sector. On the one hand, stocks such
as steel manufacturers and fertilizer producers benefited from the
rise in prices for their products. Conversely, companies that use
these products as inputs, such as paint manufacturers, had a more
difficult time as their profitability was crimped by the higher
prices. Overall, materials stocks declined slightly in the first
quarter.
All Energy industry groups advanced by double digits in the
quarter, led by a 48.7% gain for the Equipment and Services group.
This was in contrast to 2021 when the group trailed the performance
of the sector. We have favored exploration and production (E&P)
companies over service providers because they benefit more directly
from a higher oil price. While this has benefited the Fund over the
last two years, it was a drag on relative performance in the first
quarter. We remain comfortable being overweight E&P stocks
versus services but will continue to evaluate the relative merits
of each.
In the Integrated Oil and Gas industry group, we moved to an
overweight position in Occidental Petroleum during the first
quarter. After acquiring Anadarko Petroleum in 2019, the company
struggled with the large amount of debt it assumed to complete the
acquisition. High oil prices have enabled them to strengthen their
balance sheet by paying down much of the debt, leaving them in a
better position going forward. The stock rose 30% after we added to
the position in February, outperforming the sector by more than
20%.
The Refining and Marketing group was the strongest relative
performer in the first quarter, as our investments in the group
advanced 32.0% compared to a 30.8% return for the benchmark. Our
overweight in Marathon Petroleum was a key driver. In addition to
benefiting from rising demand for gasoline and other refined
products, Marathon is in a very strong financial position after
completing the sale of its retail gasoline business.
The Fund’s Materials holdings also outperformed, with a return of
-1.9% that beat the
benchmark’s -2.4% result.
Our underweight in the Specialty Chemicals group was a notable
contributor, as these stocks tend to be more negatively exposed to
inflationary pressures and have struggled in the current
environment. Stock selection in the sector also aided relative
performance. Specifically, our position in Steel Dynamics was up
34.6% in the first quarter. The company continues to benefit from
elevated steel prices, and we expect it to generate significant
free cash flow going forward as their capital spending
moderates.
For the three months ended March 31, 2022, the total return on the
Fund’s net asset value (“NAV”) per share (with dividends and
capital gains reinvested) was
Letter to Shareholders (continued)
27.7%. This compares to a total return of 28.3% for the Fund’s
benchmark, comprised of the S&P 500 Energy Sector (74% weight)
and the S&P 500 Materials Sector (26% weight), over the same
time period. The total return on the market price of the Fund’s
shares for the period was 27.3%.
For the twelve months ended March 31, 2022, the Fund’s total return
on NAV was 52.1%. Comparable return for the Fund’s benchmark was
51.1%. The Fund’s total return on market price was 50.1%.
During the quarter, the Fund paid distributions to shareholders of
$2.4 million, or $.10 per share, consisting of $.02 net investment
income, $.03 short-term capital gain, and $.01 long-term capital
gain realized in 2021, and $.04 net investment income realized in
2022.
There’s no shortage of uncertainty as we look ahead, starting with
the question of how long the war in Ukraine will last. Potential
outcomes of the conflict vary widely. Whatever path it takes, the
war and ensuing sanctions cloud the picture around oil and gas
prices, supply chain disruptions, and even Western government and
monetary policies. The Fed’s path forward will require a delicate
balance between managing inflation and avoiding a hard economic
landing. We are mindful of the suffering of the people of Ukraine
and elsewhere who feel the impact of the war. We hope for a return
to peace, and that we have moved past the worst of the pandemic.
When it comes to managing our Fund, we will keep our eyes on the
long term, manage risk, make adjustments, and seek opportunities.
We continue to focus on companies that are reasonably priced and
capable of executing and delivering through whatever comes
next.
We appreciate your trust and will continue to work hard to keep
it.
By order of the Board of Directors,
Mark E. Stoeckle
Chief Executive Officer
April 21, 2022
Summary Financial Information
|
|
|
2022
|
|
|
2021
|
|
At
March 31: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
asset value per share |
|
|
|
$ |
24.42 |
|
|
|
|
$ |
16.94 |
|
|
Market price per share |
|
|
|
$ |
20.93 |
|
|
|
|
$ |
14.71 |
|
|
Shares outstanding |
|
|
|
|
24,484,655 |
|
|
|
|
|
24,084,802 |
|
|
Total net assets |
|
|
|
$ |
597,963,876 |
|
|
|
|
$ |
408,043,138 |
|
|
Average net assets |
|
|
|
$ |
536,828,174 |
|
|
|
|
$ |
367,697,599 |
|
|
Unrealized appreciation on investments |
|
|
|
$ |
128,800,842 |
|
|
|
|
$ |
(29,682,127) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the three months ended March 31: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income |
|
|
|
$ |
3,892,803 |
|
|
|
|
$ |
2,588,622 |
|
|
Net
realized gain (loss) |
|
|
|
$ |
21,682,426 |
|
|
|
|
$ |
2,518,140 |
|
|
Total return (based on market price) |
|
|
|
|
27.3% |
|
|
|
|
|
30.3% |
|
|
Total return (based on net asset value) |
|
|
|
|
27.7% |
|
|
|
|
|
24.0% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key
ratios: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses to average net assets* |
|
|
|
|
0.71% |
|
|
|
|
|
1.39% |
|
|
Net
investment income to average net assets* |
|
|
|
|
2.96% |
|
|
|
|
|
2.86% |
|
|
Portfolio turnover* |
|
|
|
|
36.9% |
|
|
|
|
|
35.9% |
|
|
Net
cash & short-term investments to net assets |
|
|
|
|
0.8% |
|
|
|
|
|
0.5% |
|
|
*
Annualized
Ten Largest Equity Portfolio Holdings
March 31, 2022
(unaudited)
|
|
|
Market
Value
|
|
|
Percent
of Net
Assets
|
|
Exxon Mobil Corporation |
|
|
|
$ |
104,123,691 |
|
|
|
|
|
17.4% |
|
|
Chevron Corporation |
|
|
|
|
89,408,488 |
|
|
|
|
|
15.0 |
|
|
ConocoPhillips |
|
|
|
|
48,922,600 |
|
|
|
|
|
8.2 |
|
|
Pioneer Natural Resources Company |
|
|
|
|
24,352,922 |
|
|
|
|
|
4.1 |
|
|
Linde plc |
|
|
|
|
21,657,354 |
|
|
|
|
|
3.6 |
|
|
Marathon Petroleum Corporation |
|
|
|
|
21,202,717 |
|
|
|
|
|
3.5 |
|
|
EOG
Resources, Inc. |
|
|
|
|
21,175,248 |
|
|
|
|
|
3.5 |
|
|
Occidental Petroleum Corporation |
|
|
|
|
18,097,280 |
|
|
|
|
|
3.0 |
|
|
Schlumberger N.V. |
|
|
|
|
17,507,178 |
|
|
|
|
|
2.9 |
|
|
Diamondback Energy, Inc. |
|
|
|
|
13,584,628 |
|
|
|
|
|
2.3 |
|
|
|
|
|
|
$ |
380,032,106 |
|
|
|
|
|
63.5% |
|
|
March 31, 2022
(unaudited)
|
|
|
Shares
|
|
|
Value (a)
|
|
Common Stocks — 99.2% |
|
Energy — 79.4%
|
|
Equipment & Services —
6.2%
|
|
Baker Hughes Company
|
|
|
|
|
171,900 |
|
|
|
|
$ |
6,258,879 |
|
|
Halliburton Company
|
|
|
|
|
349,970 |
|
|
|
|
|
13,253,364 |
|
|
Schlumberger N.V.
|
|
|
|
|
423,800 |
|
|
|
|
|
17,507,178 |
|
|
|
|
|
|
|
37,019,421 |
|
|
Exploration & Production —
27.1%
|
|
APA Corporation
|
|
|
|
|
222,200 |
|
|
|
|
|
9,183,526 |
|
|
Canadian Natural Resources
Limited
|
|
|
|
|
47,800 |
|
|
|
|
|
2,962,644 |
|
|
Cheniere Energy, Inc.
|
|
|
|
|
26,000 |
|
|
|
|
|
3,604,900 |
|
|
ConocoPhillips
|
|
|
|
|
489,226 |
|
|
|
|
|
48,922,600 |
|
|
Coterra Energy Inc.
|
|
|
|
|
153,600 |
|
|
|
|
|
4,142,592 |
|
|
Devon Energy Corporation
|
|
|
|
|
119,600 |
|
|
|
|
|
7,071,948 |
|
|
Diamondback Energy, Inc.
|
|
|
|
|
99,100 |
|
|
|
|
|
13,584,628 |
|
|
EOG Resources, Inc.
|
|
|
|
|
177,600 |
|
|
|
|
|
21,175,248 |
|
|
Hess Corporation
|
|
|
|
|
53,700 |
|
|
|
|
|
5,748,048 |
|
|
Marathon Oil Corporation
|
|
|
|
|
118,400 |
|
|
|
|
|
2,973,024 |
|
|
Occidental Petroleum
Corporation
|
|
|
|
|
318,951 |
|
|
|
|
|
18,097,280 |
|
|
Pioneer Natural Resources
Company
|
|
|
|
|
97,400 |
|
|
|
|
|
24,352,922 |
|
|
Whiting Petroleum Corporation
|
|
|
|
|
452 |
|
|
|
|
|
36,842 |
|
|
Whiting Petroleum
Corporation warrants,
strike price $73.44, expires 9/1/24 (b)
|
|
|
|
|
2,654 |
|
|
|
|
|
54,407 |
|
|
Whiting Petroleum
Corporation warrants,
strike price $83.45, expires 9/1/25 (b)
|
|
|
|
|
1,327 |
|
|
|
|
|
19,786 |
|
|
|
|
|
|
|
161,930,395 |
|
|
Integrated Oil & Gas —
33.9%
|
|
BP plc Sponsored ADR
|
|
|
|
|
51,300 |
|
|
|
|
|
1,508,220 |
|
|
Cenovus Energy Inc.
|
|
|
|
|
176,700 |
|
|
|
|
|
2,947,356 |
|
|
Chevron Corporation
|
|
|
|
|
549,091 |
|
|
|
|
|
89,408,488 |
|
|
Exxon Mobil Corporation
|
|
|
|
|
1,260,730 |
|
|
|
|
|
104,123,691 |
|
|
Shell plc Sponsored ADR
|
|
|
|
|
28,600 |
|
|
|
|
|
1,570,998 |
|
|
Suncor Energy Inc.
|
|
|
|
|
46,400 |
|
|
|
|
|
1,512,176 |
|
|
TotalEnergies SE Sponsored ADR
|
|
|
|
|
28,500 |
|
|
|
|
|
1,440,390 |
|
|
|
|
|
|
|
202,511,319 |
|
|
Refining & Marketing —
7.2%
|
|
Marathon Petroleum Corporation
|
|
|
|
|
247,985 |
|
|
|
|
|
21,202,717 |
|
|
Phillips 66
|
|
|
|
|
100,575 |
|
|
|
|
|
8,688,674 |
|
|
Valero Energy Corporation
|
|
|
|
|
131,600 |
|
|
|
|
|
13,362,664 |
|
|
|
|
|
|
|
43,254,055 |
|
|
Schedule of Investments (continued)
March 31, 2022
(unaudited)
|
|
|
Shares
|
|
|
Value (a)
|
|
Storage & Transportation —
5.0%
|
|
Kinder Morgan, Inc.
|
|
|
|
|
464,400 |
|
|
|
|
$ |
8,781,804 |
|
|
ONEOK, Inc.
|
|
|
|
|
143,500 |
|
|
|
|
|
10,135,405 |
|
|
Williams Companies, Inc.
|
|
|
|
|
328,700 |
|
|
|
|
|
10,981,867 |
|
|
|
|
|
|
|
29,899,076 |
|
|
Materials — 19.8%
|
|
Chemicals — 11.5%
|
|
Air Products and Chemicals,
Inc.
|
|
|
|
|
23,500 |
|
|
|
|
|
5,872,885 |
|
|
Albemarle Corporation
|
|
|
|
|
9,000 |
|
|
|
|
|
1,990,350 |
|
|
Celanese Corporation
|
|
|
|
|
6,000 |
|
|
|
|
|
857,220 |
|
|
CF Industries Holdings, Inc.
|
|
|
|
|
47,900 |
|
|
|
|
|
4,936,574 |
|
|
Corteva Inc.
|
|
|
|
|
66,245 |
|
|
|
|
|
3,807,763 |
|
|
Dow, Inc.
|
|
|
|
|
65,745 |
|
|
|
|
|
4,189,271 |
|
|
DuPont de Nemours, Inc.
|
|
|
|
|
73,987 |
|
|
|
|
|
5,443,963 |
|
|
Eastman Chemical Company
|
|
|
|
|
8,900 |
|
|
|
|
|
997,334 |
|
|
Ecolab Inc.
|
|
|
|
|
25,600 |
|
|
|
|
|
4,519,936 |
|
|
FMC Corporation
|
|
|
|
|
10,500 |
|
|
|
|
|
1,381,485 |
|
|
International Flavors &
Fragrances Inc.
|
|
|
|
|
21,006 |
|
|
|
|
|
2,758,718 |
|
|
Linde plc
|
|
|
|
|
67,800 |
|
|
|
|
|
21,657,354 |
|
|
LyondellBasell Industries N.V.
|
|
|
|
|
61,400 |
|
|
|
|
|
6,313,148 |
|
|
Mosaic Company
|
|
|
|
|
21,001 |
|
|
|
|
|
1,396,567 |
|
|
PPG Industries, Inc.
|
|
|
|
|
19,700 |
|
|
|
|
|
2,582,079 |
|
|
|
|
|
|
|
68,704,647 |
|
|
Construction Materials — 2.2%
|
|
Martin Marietta Materials,
Inc.
|
|
|
|
|
4,500 |
|
|
|
|
|
1,732,005 |
|
|
Sherwin-Williams Company
|
|
|
|
|
38,700 |
|
|
|
|
|
9,660,294 |
|
|
Vulcan Materials Company
|
|
|
|
|
9,800 |
|
|
|
|
|
1,800,260 |
|
|
|
|
|
|
|
13,192,559 |
|
|
Containers & Packaging — 2.0%
|
|
Amcor plc
|
|
|
|
|
125,100 |
|
|
|
|
|
1,417,383 |
|
|
Avery Dennison Corporation
|
|
|
|
|
5,500 |
|
|
|
|
|
956,835 |
|
|
Ball Corporation
|
|
|
|
|
29,100 |
|
|
|
|
|
2,619,000 |
|
|
International Paper Company
|
|
|
|
|
28,200 |
|
|
|
|
|
1,301,430 |
|
|
Packaging Corporation of
America
|
|
|
|
|
7,600 |
|
|
|
|
|
1,186,436 |
|
|
Sealed Air Corporation
|
|
|
|
|
55,500 |
|
|
|
|
|
3,716,280 |
|
|
WestRock Company
|
|
|
|
|
22,200 |
|
|
|
|
|
1,044,066 |
|
|
|
|
|
|
|
12,241,430 |
|
|
Metals & Mining — 4.1%
|
|
Freeport-McMoRan, Inc.
|
|
|
|
|
233,200 |
|
|
|
|
|
11,599,368 |
|
|
Newmont Corporation
|
|
|
|
|
86,800 |
|
|
|
|
|
6,896,260 |
|
|
Nucor Corporation
|
|
|
|
|
21,100 |
|
|
|
|
|
3,136,515 |
|
|
Steel Dynamics, Inc.
|
|
|
|
|
32,500 |
|
|
|
|
|
2,711,475 |
|
|
|
|
|
|
|
24,343,618 |
|
|
|
Schedule of Investments (continued)
March 31, 2022
(unaudited)
|
|
|
Shares
|
|
|
Value (a)
|
|
Total Common Stocks |
|
(Cost $464,296,078)
|
|
|
|
|
|
|
|
|
|
$ |
593,096,520 |
|
|
Short-Term Investments — 0.8% |
|
Money Market Funds — 0.8%
|
|
Morgan Stanley
Institutional Liquidity Funds Prime Portfolio, 0.36% (c)
|
|
|
|
|
4,001,200 |
|
|
|
|
|
4,000,400 |
|
|
Northern Institutional Treasury
Portfolio, 0.17% (c)
|
|
|
|
|
678,340 |
|
|
|
|
|
678,340 |
|
|
Total Short-Term Investments |
|
(Cost $4,678,340)
|
|
|
|
|
|
|
|
|
|
|
4,678,740 |
|
|
Total — 100.0% of Net Assets |
|
(Cost $468,974,418)
|
|
|
|
|
|
|
|
|
|
|
597,775,260 |
|
|
Other Assets Less Liabilities — 0.0% |
|
|
|
|
|
|
|
|
|
|
188,616 |
|
|
Net Assets — 100.0%
|
|
|
|
|
|
|
|
|
|
$ |
597,963,876 |
|
|
|
(a)
Common stocks and warrants are listed on the New York Stock
Exchange or NASDAQ and are valued at the last reported sale price
on the day of valuation.
(b)
Presently non-dividend paying.
(c)
Rate presented is as of period-end and represents the annualized
yield earned over the previous seven days.
Information regarding transactions in equity securities during the
quarter can be found on our website at: www.adamsfunds.com.
Disclaimers
This report contains “forward-looking statements” within the
meaning of the Securities Act of 1933 and the Securities Exchange
Act of 1934. By their nature, all forward-looking statements
involve risks and uncertainties, and actual results could differ
materially from those contemplated by the forward-looking
statements. Several factors that could materially affect the Fund’s
actual results are the performance of the portfolio of stocks held
by the Fund, the conditions in the U.S. and international financial
markets, the price at which shares of the Fund will trade in the
public markets, and other factors discussed in the Fund’s periodic
filings with the Securities and Exchange Commission.
This report is transmitted to the shareholders of the Fund for
their information. It is not a prospectus, circular or
representation intended for use in the purchase or sale of shares
of the Fund or of any securities mentioned in the report. The rates
of return will vary and the principal value of an investment will
fluctuate. Shares, if sold, may be worth more or less than their
original cost. Past performance is no guarantee of future
investment results.
[This Page Intentionally Left Blank]
Adams Natural Resources Fund, Inc.
Board of Directors
|
Enrique R. Arzac (2)(4) |
|
|
Roger W. Gale (2) (3) |
|
|
Kathleen T.
McGahran(1)(5)
|
|
|
Kenneth J. Dale(1)(2) (3) |
|
|
Mary Chris Jammet (2) (4) |
|
|
Jane Musser Nelson (2)
|
|
|
Frederic A. Escherich (1) (3) (4)
|
|
|
Lauriann C. Kloppenburg(1)(3) (4)
|
|
|
Mark E. Stoeckle (1)
|
|
(1)
Member of Executive
Committee
(2)
Member of Audit
Committee
(3)
Member of Compensation
Committee
(4)
Member of Nominating and
Governance Committee
(5)
Chair of the Board
Officers
|
Mark E.
Stoeckle |
|
|
Chief Executive Officer
|
|
|
James P.
Haynie, CFA |
|
|
President
|
|
|
Brian S.
Hook, CFA, CPA |
|
|
Vice President, Chief Financial
Officer and Treasurer
|
|
|
Janis F. Kerns
|
|
|
Vice President,
General Counsel, Secretary and Chief Compliance Officer
|
|
|
Gregory W.
Buckley |
|
|
Vice President—Research
|
|
|
Michael A.
Kijesky, CFA |
|
|
Vice President—Research
|
|
|
Michael E.
Rega, CFA |
|
|
Vice President—Research
|
|
|
Jeffrey R.
Schollaert, CFA |
|
|
Vice President—Research
|
|
|
Christine M.
Sloan, CPA |
|
|
Assistant Treasurer and Director of
Human Resources
|
|
500 East Pratt Street, Suite 1300, Baltimore, MD 21202
410.752.5900 800.638.2479
Website: www.adamsfunds.com
Email: investorrelations@adamsfunds.com
Tickers:
PEO (NYSE), XPEOX (NASDAQ)
Independent Registered Public Accounting Firm: PricewaterhouseCoopers
LLP
Custodian of Securities: The Northern Trust
Company
Transfer Agent & Registrar: American Stock Transfer
& Trust Company, LLC
Stockholder Relations Department
6201 15th
Avenue
Brooklyn, NY 11219
(866) 723-8330
Website:
www.astfinancial.com
Email:
info@astfinancial.com
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