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  • Gus Crennan

Balmoral Fund 3Q18 Update



The Balmoral Fund’s unit price, after fees, as at end September 2018 was $1.21748

Portfolio summary


As at 31 September 2018 we were collectively part-owners of 17 companies. Our portfolio of investments is below:


  1. Villeroy & Boch – German super premium porcelain.

  2. Inwido – Swedish window and door manufacturer

  3. Hugo Boss – German corporate and smart casual clothier

  4. Sartorius Stedim Biotech – French pharmaceutical and laboratory equipment supplier

  5. Kroger – US retailer

  6. Dunelm – UK home furnishing retailer

  7. H&M – Swedish fashion retailer

  8. Borregaard ASA – Norwegian natural chemicals

  9. Gentex – US engineering group which manufactures automatic-dimming rear-view mirrors

  10. Headlam Group – British flooring company

  11. Snap-On Incorporated – US specialty tools company

  12. Mattel – US toy, and increasingly entertainment, company

  13. Subaru – Japanese car company

  14. Telstra – Australian telecommunications company

  15. Euronext – European securities market exchange (see below)

  16. Skyworks – Dominant US semiconductor chip company (see below)

  17. LAM Research – Dominant US wafer fabrication company (see below)


Between end June 2018 and end September 2018 we sold our stakes in 3 businesses and purchased part ownership in 3 new ones.

  1. Tractor Supply Group was sold in late July for a gain over 53% from our Fund’s purchase price. This is a great business however my concern is it remains a US retail franchise, thus subject to intensive competitive and inflationary pressures which makes me comfortable to let it go after such a good run and give the company’s shares are now trading at an expensive valuation.

  2. Pandora was sold at a loss a little over 19%. This was always a very small position in our fund, 2.4% at its peak, which was acquired when the share price fell sharply after a series of poor corporate results and I mistakenly thought the company’s results would stabilise. The company’s strategy has transitioned however the execution has continued to be poor.

  3. Jeronimo Martins was another small retail position, under 3% of our fund at its peak, and the most emerging market exposed in our portfolio. Given recent performance and rising geopolitical risk it was sold at a loss a little over 22%.

  4. Euronext is a securities and derivative exchange for multiple European national exchanges. This company is like the ASX for Western Continental Europe. In addition to having excellent fundamentals and an attractive valuation when we purchased our part ownership there is some really exciting growth opportunities when Europe emerges from this very long period of economic malaise and we can expect more capital raising and secondary market transactions to reflect that refreshed confidence which I expect to drive increased earnings from this exchange.

  5. Skyworks is a leading semiconductor company which already has its products embedded in a host of high technology gadgets such as phones and wearables – its historic strength has been radio frequency and mobile communications systems.

  6. LAM Research designs and manufactures the world’s leading wafer fabrication equipment which allows the manufacture of smaller, faster and better performing semiconductors and integrated circuits.


Go Ahead Group you might recall was first sold in April 2018 for a gain of 17%. Although trading is not our core strategy it can add to our overall objective. So subsequent to that April sale, when the share price fell heavily, we took advantage and reacquired shares in this company on 16 July. That second ownership stake in the company has now been sold for a further 15% gain.


Portfolio construction

As at end September our portfolio looked roughly as follows:

  • 9% cash

  • 40% US companies

  • 31% European companies

  • 12% UK companies

  • 4% Japanese company (Subaru)

  • 4% Australian company (Telstra)

Our fund retains some capacity to take advantage of good opportunities as they arise in the future although we are well invested at present.


Regards,

Angus

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ABN 33 603 492 039

ACN 603 492 039

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