09 Feb 2015
Cyan C3G Fund +1.9% in January 2015
The Cyan C3G Fund delivered another solid month of performance, gaining 1.9% after all fees.
The market volatility continued in January, but the early market losses were stemmed by a rebound in commodity prices (specifically oil which bounced more than 10% from its sub US$45 lows) helping the All Ords eke out a 3.0% gain. The Small Ordinaries made a more moderate gain of just 0.9% without the benefit of the larger resources stocks such as BHP, Rio and Woodside.
The Fund has now been invested for 6 months and has risen 7.1%, well in excess of the Small Ordinaries Accumulation Index which has fallen 5.9% over the same period.
Please download our January newsletter here for further information.
THE CYAN C3G PORTFOLIO
We made few changes to the Cyan C3G Fund in January on account of our, “If it ain’t broke, don’t fix it.” approach. Key stocks included:
The best performer in the month was financial services software provider Praemium (PPS). This sleeper of a stock rose 28% after providing the market with strong 2nd financial quarter cash flow numbers and solid growth in Funds on Platform, which now exceed $3bn. The management of the business has worked hard over recent years to achieve profitable scale and it appears the market is now recognizing the promising outlook for the company.
Our decision to invest in the IPO of jewellery retailer Lovisa (LOV) was rewarded with the stock making further gains in the month to end January trading 22% above its December IPO price. Despite some patches of softness in the retail market (we point to recent downgrades from listed retailers such as Kathmandu, Oroton, Specialty Fashion and The Reject Shop), we understand Lovisa’s stores both domestically and overseas are trading well and we expect a solid maiden earnings report in February.
Bellamy’s Organic (BAL) rose 6% in January after the company announced pre-Christmas that its improved market share in Australia and early success in China will result in FY15 sales and profit to be 20% ahead of its prospectus forecasts.
THE OUTLOOK
February has provided trading opportunities and the reporting season has begun to kick into gear. We expect many of the Fund’s holdings will report solid earnings numbers in the coming weeks.
However we do remain conservatively invested and spotlight the RBA’s most recent 25bp rate cut as signifying ongoing macro challenges for the domestic economy.
Elaborating on last month, we have positioned our portfolio around a couple of key themes:
1. Invest in companies that earn through the cycle – these include a number of positions in the financial services, telco and healthcare sectors (eg. BLA, CAJ, CGF, ISU, MTU, VTG).
2. Invest in companies with specific growth drivers – these include those exposed to structural changes within industries, those growing market share, or with significant geographic expansion plans, either organically or through acquisition. (eg. AMA, BAL, CAJ, PPS, SDA, VTG).
3. Avoid high risk and volatile sectors – including any direct resources exposure, highly leveraged businesses and unproven business models.
Often more than half the battle in the small cap sector is avoiding the losers. As such we continue to hold significant cash balances and have actively been saying “no” to a number of investment opportunities with which we have not been entirely comfortable and believe this selectivity has been key to the Fund’s solid performance track record.
We look forward to keeping our investors updated with the Fund’s progress.
Please download our January newsletter here for further information.
Dean Fergie & Graeme Carson