The BlackPearl Masters Fu
nd had a good month in July finishing up +2.45%. The fund is up +6.25% year to date (YTD). At a strategy level 7 of our 9 strategies finished in positive territory with the standout strategy being our Australian long short variable beta strategy that was up over +5%. The strategy benefited from positions that included JB Hi-Fi, Super Retail Group and Nine Entertainment.
Another positive strategy for the fund was the long short market neutral strategy which had a very strong August with positive returns generated on both the long and short side. The strategies short position in Celltrion Inc has continued to pay off. Celltrion, Inc. is a Korea-based company mainly engaged in the production and sale of biopharmaceuticals. The short position is based on a view of excessive valuation, strong competition, expected weak earnings, excessive inventory levels and continued insider selling. Since establishing the short position that stock is down 50% and was down 17% in July.
Another position that generated good performance for the market neutral strategy was a long position in Worley Parsons, which was up +10% in July. Worley is a global engineering, advisory and project management company with a focus on hydrocarbons, minerals and metals, chemicals and infrastructure. In October 2018 Worley announced the acquisition of Jacobs Energy, Chemicals and Resources division for an Enterprise Value of $3.5bn. The acquisition nearly doubles both revenue and earnings for Worley and has created an entity that on a head count basis is larger than Rio Tinto or any of Australia’s four biggest banks. Worley stock continues to look attractive based on expected synergies and valuation.
The fund’s long short macro strategy also added positively to performance with the strategy benefiting from holdings in large mega cap tech names such as Alphabet, Microsoft and Facebook which have all now reported earnings that confirmed the investment rationale.
The macro strategy’s manager visited the Canaccord Genuity growth conference in Boston that showcased over 400 public and private companies. Some of the feedback received was that while autonomous driving is on track for public adoption, level 5 driving is still some time away given the combination of LIDAR, 5G communication, camera technology and processing power required to make it a reality. US tech companies are generally growing faster organically are investing more in R&D, have larger addressable markets and are trading at lower valuation than Australia peers. Generally speaking, Americans seemed to be unconcerned about trade wars and international issues given Trumps actions.
August is reporting season in Australia and our mangers have been busy visiting companies and meeting with management to try and find an edge on both existing and new positions.
Comments