Update No. 214 – 08/05/15

What a turnaround the last 11 weeks has brought.

On 27 February, we reported we trailed the market by 8.96%. Today, just 11 weeks later, we have recaptured the advantage. About half of the turnaround has come through a rise in the value of your holding in EGP; the remainder has come from a fall in the benchmark.

This perfect storm is a fund managers dream, everything (almost) you already own is going up in value, everything (almost) you may like to own in the future is getting cheaper.

We eliminated one holding this week; it was a holding in Codan (CDA) that we timed very poorly. I bought too soon when the share-price went into free-fall in late 2013 on news of counterfeit versions of their products hitting the market and the collapsing gold price cruelling the market for their gold-detectors. I bought more when the share price was languishing in the 60 cent range, but then began to doubt how rapidly the freefalling revenues would be corrected. By the time I had sufficient confidence, the market had made the same decision. I had the chance to build this into a meaningful position at prices roughly half what I sold at this week, but I thumb-sucked and we missed out. When prices were low, this was our 2^nd smallest holding, by the time I sold this week at $1.25 per share it had grown into our 4^th smallest holding. We made an internal rate of return a little over 7% annually, and if I’m honest, it should have been fairly easy to generate closer to 15% or 20% if I had handled the position correctly. Even having paid too much for the first parcel, the market gave me an extended opportunity to build a meaningful holding in a well-run business and I missed it.

I regard the management of CDA fairly highly, they seem very shareholder oriented and I was confident the issues would be resolved and that the underlying business was sound. While I think the business has good products and a bright future, I didn’t accumulate a position large enough to be meaningful and I have immediately applied the liberated capital to alternatives that I believe have superior prospects over the medium term.

With 53 days until the end of the financial year and the gap between ourselves and the benchmark tiny, we shall be doing all in our power to consolidate the advantage and ensure we finish the year ahead – Tony Hansen 08/05/2015

EGP Fund No. 1 Pty Ltd. Up by 8.38%, leading the benchmark by 0.02% since July 1^st 2014. Since inception, EGP Fund No. 1 Pty Ltd is Up by 84.64%, leading the benchmark by 44.78% all-time (April 1^st 2011).

^{*1 after 31May 2013 dividend of 2.333 cents per share plus 1.000 cent per share Franking Credit & 31 May 2014 Dividend of 7.000 cents per share plus 3.000 cent per share Franking Credit}

^{*2 calculated based on dividends reinvested}