- Sean Rapley
August 2020 - Luke's Fund Update
We are pleased to report Luke's Fund achieved a return of 11% over the month of August. The top two contributors to the performance over the month were:
Selfwealth, which contributed 32% of the returns this month. Selfwealth's share price continued to rally on the release of the Fy2020 results, which included a business update. The business update confirmed the growth in active traders continues, and reported the new international share platform will be released this November. Part of our thesis is that negative real interest rates are driving savers to become investors. We believe negative real interest rates are likely to continue well into the post-COVID world, and this will continue to provide strong tailwings for Selfwealth, which is developing the best platform for young investors.
Pointerra, which contributed 25% of the returns this month. There was no real news to report over the quarter. However, we there were some notable additions to the Pointerra team, which is evidence they are building for continued growth.
The top three detractors for the month were:
A2 Milk - which contributed -5% of the returns this month. It appears investors were none to pleased in A2 Milk investment in milk production, however, we believe it is necessary for AS milk to build partnerships with Chinese owned producers and distributors to minimise the risk of a Treasury Wines like sovereign event.
Advance Nanotech - which contributed -3% of the returns this month
Paygroup - which contributed -2% of the returns this month
As mentioned in the July report, we are developing a precious metals hedge to address the risk of currency devaluation and political instability. With negative real interest rates, heavily indebted governments, and escalating political instability, we have deployed capital into a diverse basket of precious metals, producing gold mines, gold mine developers, and gold exploration companies. As at the end of August, the precious metals portfolio is 13% of the fund portfolio, with the following breakdown:
Precious metals - 28%
Gold mines - 18%
Gold mine developers - 30%
Gold explorers - 24%
Gold Hedge has returned 1% for the month and 3.8% year to date.
Notable changes to the portfolio included:
We sold out of Dropsuite following the HY report. We considered the valuation to be stretched, given the quality of its earnings, and tough competition in the space it competes. We expect another capital raise down the track and the business is vulnerable to high churn events due to its reliance on 3rd party re-sellers.
We added to our gold bullion and gold explorers over the month, and expanded gold hedge to 13% - We added De Grey Mining to our portfolio. De Grey Mining have discovered the Hemi gold field in the Pilbara, which is looking like the first Tier 1 discovery in Australia since 2005.
If you have any opinions on the companies we hold, or what like to know more, we would love to hear your feedback.