Balmoral Fund 2Q19 Fund Update
Updated: Nov 17, 2020
We have enjoyed a strong three months with the Fund increasing in value 3.6% from end of March 2019 to end of June 2019. I have locked in some excellent capital gains because I believe risk in markets is elevated and increasing.
Our returns for the financial year 2018-19 were 11.3% and we ended the quarter conservatively positioned with around 30% in shares and 70% in cash.
As we have reached the end of the 2018-19 financial year the Balmoral Fund’s accountants have commenced work preparing the Fund’s financial statements and our individual capital gains and distribution components. I will send you the information required for your own tax returns as soon as that work is complete. In the interim the numbers which I provide below should be regarded as preliminary.
As at end June 2019 the Balmoral Fund’s unit price was $1.263597. When I include reinvested distributions, and after accounting for all fees and expenses, this means:
From inception on Australia Day 2017 our Founding Investors are up 29.5% which translates to a compound annual growth rate (CAGR) of 11.3%,
For the 2018-19 financial year our returns were 11.3%,
Our returns over calendar year 2019 to date were 13.7%, and
Over the last 3 months your investments increased by 3.6%.
At quarter end we were holding a major allocation in cash which means we were conservatively positioned. I provide an appendix to this letter that explains the conservative positioning. The summary is:
Avoiding losses is as critical to our purpose as capturing investment gains,
Investor uncertainty is high because the US is changing global trade rules,
Global equity markets are filled with confidence meaning opportunities are limited,
In contrast global bond markets are signaling fixed income investors are very cautious, and
We will continue only taking on the risks we want.
As at end June 2019 we are collectively part-owners of 10 companies, down from 14 at the end of March. Our current portfolio of investments is below:
Villeroy & Boch - German super premium porcelain.
Hugo Boss - German corporate and smart casual clothier
Sartorius Stedim Biotech - French pharmaceutical and laboratory equipment supplier
Kroger - US retailer
H&M – Swedish fashion retailer
Mattel – US toy and entertainment company
Telstra – Australian telecommunications
Euronext – European securities market exchange
Biogen Incorporated – US biotech
Cheesecake Factory – US restaurant chain
We repurchased shares in Cheesecake Factory just before the end of June. We have owned part of this business twice before and both times we made good returns on our stake. Our acquisition price this time was the best yet. The business looks in great shape with a strong balance sheet and consistently producing cash from growing revenues.
Between end March 2019 and end June 2019 I sold our part ownership of 5 businesses, 4 of which are American, due their exposure to emerging global trade conflicts:
Skyworks – Tech exposure
LAM Research – Tech exposure
Gentex - Auto exposure
Snap-On - Auto exposure
Subaru – Auto exposure
As at end June 2019 our portfolio looks roughly as follows:
70% cash (+33% from end March)
13% US companies (-26% from end December)
12% European companies (-5% from end December)
5% Australian company (Telstra, unchanged)
0% UK companies (unchanged)
0% Asian companies (-3% from end December)
There is additional information in the appendix below and I welcome any questions or queries you have about our portfolio and encourage you to call or email me anytime.