10 Dec 2020
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The Fund enjoyed an excellent November (our best on record) with a rise of 12.2%, ahead of the substantial 10.2% gain in the All Ordinaries Accumulation Index (its biggest monthly gain since 1988).
The Fund’s performance this month is especially pleasing given the more than 20% combined allocation in cash and holdings in companies that are yet to list (and hence were not upwardly valued).
Month in review
Across the board, our Fund holdings performed exceptionally well.
Long-term holding Readcloud (RCL), in which we initially invested in the 20c IPO in February 2018, gained 75% to close the month at 70c. RCL’s revenue growth has attracted the attention of a number of US investment firms, two of which have lodged substantial shareholding notices in the past month. This accelerated the positive momentum stemming from a company acquisition in October, an upbeat November AGM and a $4m boost to the balance sheet through the exercising of options.
Micro-investment platform Raiz (RZI) gained 30% in the month as it benefited from organic growth in its underlying FUM which now stands at $580m and customer numbers of 1.2m, an impressive increase of 6% in November alone. Our initial, and growing, attraction of RZI as a business is the incredibly strong recurring revenue stream of now almost $1m per month based on monthly fee generation.
Alcidion (ALC) rose 50% after its clinical decision-making software, Miya Precision, won a landmark $9.5m deal with an NHS Trust hospital (South Tees) in the UK. We have been invested in ALC since March 2019, over which time the company’s share price has risen from 4c to over 20c.
Quickstep (QHL) announced its acquisition of Boeing Component Repairs which helped add 20% to its share price in the month. We’ve been a long-term supporter of QHL and recently talked about our attraction to it as an investment in the stock market news site, The Motley Fool.
Last month we wrote about, and still maintain, what we believe is a considerable stock market driver:
“For us, the most significant recent event … has been the RBA’s decision to cut official rates to 0.1% … Critically the lowered interest rate makes asset classes other than term deposits and money market securities increasingly attractive. In short, investors now realise that their money will do almost no work for them sitting in the bank and this rotation out of cash, term deposits and bonds is starting to be reflected in the renewed market buoyancy thus far in November.”
Whilst some pockets of the market have struggled — note the rotation out of Covid-19 tailwind stocks like Kogan (-20%), Temple and Webster (-20%) and JB HiFi (-10%) — market optimism remains intact as evidenced by the recent 60% premium on the largest IPO of the year, Nuix.
In terms of the Fund, we have investments in two promising IPOs coming on in December: road safety phone detection company Acusensus and game developer Playside Studios, which we expect could further bolster the Fund’s returns into the end of the year.
At the time of writing the Fund has made more advances into December and, all else being equal, should result in a calendar 2020 result ahead of the All Ords.
As we will not distribute the December report until early January 2021, we would like to thank all our investors for their ongoing support in what has been an incredibly volatile and challenging (but ultimately rewarding) year in which to maintain a stock market investment.
We would like to wish all our readers a safe and happy holiday season and look forward to unearthing more exciting investment opportunities in 2021.
Dean Fergie and Graeme Carson
AFSL No. 453209
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