16 Mar 2015
Thanks in part to the macro tailwinds, the C3G Fund had a solid month, gaining 6.3% after all fees with stocks across the board rising including: Capital Health (CAJ), Freelancer (FLN), M2 (MTU) and Praemium (PPS).
Please download our February newsletter here for further information.
Whilst monthly Fund returns of this magnitude will clearly not be sustainable month-on-month, February was by no means a “fluke” with share price rises being backed by solid operating performances from the underlying businesses.
Some of the major Fund positions that contributed to February’s performance included:
Vita Group (VTG +25% m.o.m.) was again a major winner for the fund after strong iPhone 6 sales – that we foreshadowed back in September last year (http://tinyurl.com/qj99hnf) – helped deliver a monster 1H15 NPAT result of $13.4m (80% of analysts’ forecasts for the full year). With the company paying both normal and special dividends thanks to ~$40m in excess franking credits, Vita has proved itself as an extremely successful growth and yield investment.
Blue Sky Alternative Investments (BLA)(+37% in Feb) is an investment specialist managing a number of private equity, venture capital and real estate funds (listed and unlisted). We added BLA to the C3G Fund in October 2014 as the company began to gain significant traction in fund inflows. By June 2015, BLA is expected to have in excess of $1bn under management, up from $700m the prior year. With more than 50cps in cash and assets on its balance sheet and growing annuity revenue from management fees, we continue to see great potential in the company as it begins to enjoy major economies of scale and has a number of ‘catalyst events’ flagged for CY15.
Smash-repair consolidator, AMA Group (AMA +24%) posted a solid first half NPAT of $4.4m (+42%) which included the contribution of a number of acquisitions in the prior year that have been positively integrated. With further industry consolidation expected, combined with a 4%+ yield, we expect the positive stock momentum to continue.
THE OUTLOOK
Much of the Fund’s outperformance to date has been due to our conservative investment style and tendency for the Fund to not go backwards in a declining market. It is worth remembering that the RBA’s rate cut was made in-part due to weakness in the local economy with Governor Glenn Stevens saying, “growth is continuing at a below-trend pace, with domestic demand growth overall quite weak”.
However the advantage of running a smaller-cap fund is the ability to cherry-pick those companies that are likely to perform in a range of economic environments. Given the present outlook we are targeting companies that:
1. Benefit in a soft economy (credit agencies, low-cost service providers, industry consolidators);
2. Benefit from a weakening AUD currency (net exporters, travel);
3. Operate in sectors not susceptible to domestic weakness (health, technology, global market players)
However we do remain conservatively invested with reasonable cash balances ready to deploy in the case of new investments opportunities (3 of which we are currently considering) or market weakness.
We’d like to thank our investors for their support to date and look forward to keeping you updated with the Fund’s progress.
Please download our February newsletter here for further information.
