The ASX 200 Accumulated Index was down 8.9% for the month of June, and Luke's Fund was down 9.8% over the same period, bringing the Fund’s returns for FY2022 to -1.3% to date, compared to the ASX 200 Accumulated Index return for year to date of -6.4%.
FY2022 was a year of two halves, as can be seen in the table below, We note that Fund's performance was skewed towards the first half performance, as we transferred cash from Luke's Fund to Luke's Global Fund late in H1 2022:
| Luke’s Fund Return Over Period |
H1 2022 | 12.0 % |
H2 2022 | -21.7% |
Table 1
The breakdown of our holding’s contribution to performance over the Financial Year is outlined in Figure 1 below:
Figure 1 – Contribution Breakdown Bar Chart
Of the 37 portfolio holdings over the financial year, 35% generated a positive return. The majority of gains came from just three holdings. Over the month of June, the portfolio contribution breakdown according to macro regimes is outlined in Figure 2 below:
Figure 2 - Macro Segment Contribution Breakdown Bar Chart
Portfolio Breakdown
The breakdown of the portfolio as a the end of the month is outlined in Figure 3 below. We sold down a significant portion of our inflation regime holdings, and increased out exposure to deflation regime holdings to account for slowing economic growth, falling commodity prices, and a more hawkish RBA.
Figure 3 - Portfolio Macro Segment Pie Chart
TRADING ACTIVITY
We made the following portfolio changes over June:
We sold out of Santos Ltd and our oil exposure, based on evidence of demand destruction emerging as evidenced via 42Macro reported falls in US petroleum product consumption.
We sold our Elders and some of our Graincorp holdings, on recent falls in agriculture commodity prices.
We added BEAR ETF to our portfolio, which is the cornerstone of our Deflation regime assets.
We held 28% cash at the end of June. With BEAR representing 28% of the portfolio, we effectively have 56% cash deployable at the appropriate time.
COMPANY NEWS & REPORTS
Notable news from our holdings included:
4D Medical Ltd
On June 28, 2022, 4D Medical reported it has signed a multi-year, multi-site contract with I-MED, Australia largest diagnostic imaging network.
Management reported that revenue generated will be material for 4D Medical, however, it is unclear how much revenue will be generated. We note this is very encouraging, and a positive step towards gaining industry adoption.
Talga Group Ltd
On June 14, Talga Group announced BurnVoir has been appointed to secure funing / finance for the Vittangi Anode Project, with a Letter of Interest received from the Nordic Investment Bank, and design & construct partner, ABB, receiving a Letter of Support from Swiss Export Risk Insurance for ABB’s services.
KEY LEARNINGS OVER THE YEAR
The single biggest lesson we have learned this financial year, is the importance of managing macro risks, as the financial markets travel through, liquidity, profit, growth, and inflation cycles. Ignoring macro risks leaves investors exposed to significant and avoidable risks. We have a great deal to learn how best to manage macro risks, and we acknowledge the services of 42Macro for assisting us navigate a treacherous 6 months. I’ll leave this quote for readers to consider:
“If you don’t do Macro, Macro will most surely do you.” – Darius Dale.
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