Sean Rapley
Nov 30, 20203 min
The ASX 200 was up approximately 10.3% for the month of November, and we are pleased to report Luke's Fund achieved a return of 12.6% over the same period, bringing the Fund’s current returns for FY2021 to 68.2%. We have enjoyed exceptional returns yet again this month, with the top two contributors to the performance over the month being:
Talga Group, which contributed 25.3 % of the returns of the quarter. Talga Group announced that it had been awarded two UK Government grants to conduct a feasibility study into the development of an anode production facility in the UK, based on their Talnode-C product, and a pre-feasibility study into the commercialisation of their Talnode-Si product in the UK. Talga Group also announced an agreement with ABB to develop the automation production processes for their manufacturing facility in Sweden (planned to commence production in 2023). On top of this news, Elon Musk visited Sweden, which elevated speculation around a deal with Tesla. We’ll prepare a blog on Talga Group, following the release of the Niska Study, which will be released over the coming days, and which is likely to flag a significant expansion in anode production capacity by 2026.
Pointerra, which contributed 18% of the returns over the quarter. This follows an enterprise sales update, confirming the pace in contract wins continues, and a buy recommendation from an investment newsletter. CEO, Ian Olsen, in a recent presentation outlined their goal is to hit $50 M USD ACV in the medium term. We believe it will need to achieve this goal to justify its current valuation. It also appears Bevan Slattery is having a positive influence with the development of 3Dinsight.ai, a 3D, AI-powered marketplace that will enable Pointerra clients to monetise their investments in 3D data.
The top detractor for the month was Pushpay, which contributed –7.7% of the returns over the quarter. Pushpay reported strong interim results, however Mr Market appears to be concerned about the slowing customer acquisition pipeline, and the announcement of the resignation of the Huljich brothers (Chris being Peter’s alternate) from the board. The CEO was unable to provide any assurances around the Huljich’s intentions regarding their significant holdings in Pushpay, and this uncertainty appears to be a drag on the share price. This may well turn out to be a good buying opportunity, with the seasonally stronger second half ahead.
Our gold hedge portfolio returned -7.9% for the month (vs a gold price change of -10%). As at the end of November, the precious metals portfolio is 14.7% of the fund portfolio. Vaccination news was bad news for gold bugs, as the hope of an early entry into a post-COVID world saw investors switching out of gold and into recovery plays.
Notable changes to the portfolio included:
1. We closed our position in Xero this month. Xero reported revenue growth of 21%, and improving cashflow margins. However, we decided to sell on valuation grounds, given we believe there are better value opportunities internationally, and we intend to transfer cash from into the Global Fund to pursue, what we think are better opportunities. Xero has been a standout performer in the portfolio, returning 59.4% per annum since September 2016.
2. We also increased our gold bullion holdings during the month.
We are very pleased with our year to date performance. We do not anticipate the exceptional returns earned to date can continue, but we are confident that the majority of our investments have the resilience to withstand what may well be a few turbulent months, (and years) ahead. All of our businesses have strong balance sheets, and the majority of our current holdings have either benefited from, or avoided negative impact, from the COVID-19 pandemic.
If you have any opinions on the companies we hold, or what like to know more, we would love to hear your feedback.
Regards,
Sean