Cyan C3G Fund Newsletter – 30 June 2015

14 Jul 2015

The Cyan C3G Fund returned 22.3% (after all fees) in its 11 months since inception in July 2014.  Over the same period the Small Ordinaries Accumulation Index delivered a negative return -4.0% and the All Ordinaries Accumulation Index +2.0%.  Reflective of our conservative investment methodology, the Fund’s monthly volatility in achieving this return has been markedly lower than the market indices.

Please download our newsletter Cyan C3G Monthly June2015 for further information.


The Cyan C3G Fund, relatively, performed exceptionally well in June with a positive return of 0.3% an outperformance of 8.1% over the Small Ordinaries Accumulation Index.

The only significant negative contributor for the Cyan C3G Fund during June was medical imaging consolidator Capital Health (CAJ) which saw its shares fall 17% after one of its senior executives left the business.  The Fund again benefitted from strong performances from Bellamy’s (BAL) (up 28%), Freelancer (FLN) (+12%) and Yowie (YOW) (up 29%).

At the company specific level a number of companies widely held by investors released negative announcements. These included profit warnings from Seek (SEK) and Flight Centre (FLT), and ASIC enquiries into IOOF (IFL) and Slater & Gordon (SGH). Thankfully Cyan’s conservative investment framework has precluded us from investing in any of these companies.


Over the year we built positions in a number of companies that we continue to consider core holdings. These include:

AMA Group (AMA): This auto panel repair consolidator is well placed to benefit from the changing industry landscape, ultimately driven by the insurance sector. We paid $0.32 per share for our first position in AMA in September 2014 and as recently as last week added to our holding through a capital raising at $0.60.

Bellamy’s (BAL): We participated in the August 2014 IPO of this organic baby food company at an issue price of $1.00 per share. We gradually increased our position and benefited from an incredible price appreciation that saw BAL close at a 30 June price of $4.37.

Vita Group (VTG): This telecommunications retailer has been listed for many years but has recently found its form again through a strong, culture driven, management team and performance optimization of its footprint of Telstra stores. We initiated our first investment at $0.92 in August 2014 and continue to own shares at the current price of $1.70.

Some other companies with which we have enjoyed reasonable investment success include: Speedcast (SDA), M2 Communications (MTU), McMilllan Shakespeare (MMS), Lovisa Holdings (LOV), iiNet (IIN), Silver Chef (SIV),Yowie (YOW), Rhipe (RHP) and Lindsay Australia (LAU).

Of course throughout the year we have made our fair share of mistakes. These include: Rubik Financial (RFL), Grays Ecommerce (GEG), Saunders (SND), iSelect (ISU), Money3 (MNY) and Simonds Group (SIO).  Importantly, when we believe we may have got something wrong we are vigilant in our reaction.  Notably we were fortunate in that we did not get caught in any profit downgrades throughout the year.


We presently have a cash balance of ~40% accompanied by a well-diversified portfolio of ~20 companies. In terms of size, more than half of our holdings are in companies with a market capitalisation between $200m and $500m.

We reiterate our ongoing strategy, based on the following key themes:

Invest in companies not markets – the construction of the portfolio is not based on trying to predict equities market movements…it is based on company specific analysis.

Focus on quality – weight the portfolio towards proven companies generating high return on equity and redeploying capital back into their own business.

Avoid high risk and volatile sectors – including any exposure to direct resources, resource services, biotechnology, highly leveraged businesses or unproven business models.

Target companies that earn through the cycle – these include a number of positions in the financial services, telco and healthcare sectors with relatively defensive and predictable earnings streams.

Look for companies with specific growth drivers – these include those exposed to structural changes within industries, growing market share or with significant geographic expansion plans, either organically or through acquisition.

Deploy a portion of our high cash balance to build opportunistic positions as we identify them – corporate activity and new IPO activity remain buoyant and we are spending much of our effort exploring and researching new investment opportunities.

We are obviously delighted with how the C3G Fund has performed since inception and we look forward to keeping our investors updated with the Fund’s progress.

Please download our newsletter Cyan C3G Monthly June2015 for further information.