Quarter in review

Ranger Fund

Ranger had another good quarter. Overall the August reporting season was a very positive one for the companies held by the fund.

Redbubble, the on-line marketplace retailer, rallied over 65% during the quarter on the back of a positive company update. Redbubble is rapidly becoming a case study in the market’s tendency to buy on good news and sell on bad news. After hitting some, in our opinion, short-term headwinds last year, the company has bounced back strongly. Its August update reiterated both the scale of the opportunity and the market leading position that Redbubble has been able to build. The company has a considerable journey ahead of it, but we remain of the view that the long-term opportunity is significant and that the company can successfully monetise that opportunity.

Other strong positive contributors were Wellcom, Afterpay Touch and Kogan.com. Afterpay Touch and Kogan.com delivered strong earnings results as indeed most of the other companies in Ranger did. This included the mining services trifecta of Macmahon, Swick, and Boom Logistics which continued to make solid progress in their ongoing efforts to return to full profitability.

The only earnings disappointment of note came from Vista Group, the cinema enterprise software business that we have held since its IPO in 2014. Unfortunately, almost every division had some issues which made the combined result fall well short of expectations. Additionally, the company will be making considerable investments over the next 18 months as it makes the move to provide comprehensive cloud hosting services to its customers. This all fell rather flat with investors and the share price was down 36% over the quarter. A planned investor day in November might give investors more comfort that the first half of 2019 was more of a one off, than the new norm.

We participated in the Napier Port IPO and increased our position in Corporate Travel over the quarter.  The takeover of Spicers was completed which saw its exit from the fund.

5 Oceans Fund

The 5 Oceans Fund had another solid quarter, posting positive returns for all three months. The Ranger Fund was the standout, contributing around half of the return for the quarter on its own. The global equity strategies had differing results – Acadian produced a strong result in NZD terms that was offset somewhat by the currency hedging in place, Schroders on the other hand had a volatile quarter that pretty much ended up where is started (in AUD terms) and detracted once currency hedging was taken into account. The Kohinoor tail risk strategies also contributed positively due increased market volatility and equity market falls in August.

On the bond front AMP, Daintree and our direct holdings all contributed positively as yields continued to fall. The disappointment for the quarter though was T. Rowe Price which was impacted by both country and currency positions (in particular Argentina) and from short duration positions in both US and Italy.

With bond yields quite low we took the opportunity, as some bonds matured, to add to our Term Deposits holdings to take advantage of more attractive yields.

Trans-Tasman Fund

Trans-Tasman had a solid quarter, managing to outpace the S&P/NZX50 index by 0.86%. Overall the August reporting season was a very positive one for the companies that the fund has an overweight position relative to the index.

Redbubble, the on-line marketplace retailer, rallied over 65% during the quarter on the back of a positive company update. Redbubble is rapidly becoming a case study in the market’s tendency to buy on good news and sell on bad news. After hitting some, in our opinion, short-term headwinds last year, the company has bounced back strongly. Its August update reiterated both the scale of the opportunity and the market leading position that Redbubble has been able to build. The company has a considerable journey ahead of it, but we remain of the view that the long-term opportunity is significant and that the company can successfully monetise that opportunity.

Other strong positive contributors were Wellcom, Afterpay Touch and Kogan.com. Afterpay Touch and Kogan.com delivered strong earnings results as indeed most of the other companies in the fund did. This included the mining services trifecta of Macmahon, Swick, and Boom Logistics which continued to make solid progress in their ongoing efforts to return to full profitability.

The only earnings disappointment of note came from Vista Group, the cinema enterprise software business that we have held since its IPO in 2014. Unfortunately, almost every division had some issues which made the combined result fall well short of expectations. Additionally, the company will be making considerable investments over the next 18 months as it makes the move to provide comprehensive cloud hosting services to its customers. This all fell rather flat with investors and the share price was down 36% over the quarter. A planned investor day in November might give investors more comfort that the first half of 2019 was more of a one off, than the new norm.

We participated in the Napier Port IPO over the quarter and the takeover of Spicers was completed which saw its exit from the fund.