BlackPearl Masters Fund Newsletter April 2019

The BlackPearl Masters Fund finished the month up +1.01% in April. The standout strategy for the month was our long short macro strategy which benefited from positive performance in its core equity positions on both the long and the short side. These included a long position in SmartGroup which the strategy has held for some time and a short position in Tesla which recorded a large loss in March and subsequently had to conduct a large capital raise to recapitalise the balance sheet.

The strategy also benefited from positive performance in its core international positions which include Amazon, Facebook and Alphabet. Our strategies manager continues to see continued growth opportunities for these mega cap tech names after discussing industry trends with several digital adverting sector insiders. Relative to some of the more expensive Australian tech companies which are still not fully proven these mega tech names continue to offer attractive investment opportunities.

Our long short variable beta strategy also had a good month generating positive performance on both the long and short side. The strategy benefited from a long position in HeidelbergCement which is one the world’s largest building materials companies. It is No.1 in aggregate production, No 2 in cement and No 3 in ready mixed concrete.

HeidelbergCement share price performed well in April on the back of positive leading indicator numbers for global construction activity as well as good progress on the company’s 1.5 billion Euro asset disposal process. HeidelbergCement shares were down significantly in 2018 but have so far traded up +35% in 2019. The shares still trade on a low 10x FY20 PE multiple and with expected continued earnings growth present a good investment opportunity.

Additionally, the strategy continued to benefit from a position in Fergus PLC which is the largest plumbing supplies business in America. The stock gained in April on the back of improving sentiment towards housing related stocks. The strategy took advantage of the 11% rise in April to close out the position.

Our global long short value strategy had a positive month benefiting from positions such as Berkshire Hathaway and Xero. The strategy also gained from participating in the US IPO Zoom. Zoom is a maker of remote video conference technology. The IPO was priced at $36 per share which equated to a circa $10 billion valuation. The stock was up as much as +80% on the first day of trading.