Update No. 229 – 21/08/15

Despite falls in our 2 largest holdings exceeding that of the market, we again outperformed this week. It was a relatively quiet one in terms of our holdings, however good results from two of our larger & more liquid holdings (Challenger & Medibank Private) assisted our above market result.

The great majority of our holdings are last minute reporters, so I expect something of a flood next week. Probably after close of business Friday.

Many investors abhor after-market announcements, particularly profit announcements. I think it is a sign of the very best corporate governance, particularly after close on a Friday as it allows an entire weekend for shareholders and potential shareholders to digest the information, and to then participate on the next opening of the market on a fully informed basis.

It is generally my view that the persons complaining about announcements not being made during trading hours are those who would hope to profit by being more nimble. That is to say, if they view the announcement as being poor, or below expectations, they hope to sell their stock before the market catches up with the idea. If they view the announcement as being unexpectedly good, they may hope to clean up the offer side of the market, scalping people who put in limit bids prior to the new information being available.

To be sure, I have exploited such opportunities in the past, and would hope to do so again in the future, should the chance arise. But I view the correct path for honest management, as I have stated a number of times before, involves major announcements outside of trading hours to be preferable where practicable.

We sold out of another position this week. Merchant House (MHI) was a foundation holding when the fund started in 2011, and including all the various purchases, sales and dividends along the way, we have earned an internal rate of return of 18.2% annually, which is reasonable, but not earth-shattering. We purchased shares as cheaply as 11.5c each and sold them as high as 23c and earned a sound stream of dividends along the way. MHI is a very mediocre business (primarily manufacturing shoes), but we have done OK given the difficult business they operate. As always, I could have generated better returns had I timed sales and purchases better, but the protection of an inexpensive price and excellent NTA protection always left me comfortable holding. Large inside ownership is a similar comfort.

The person who bought our MHI shares today will probably do well also as I sold them for less than the value of the cash on the balance sheet, with a Chinese property worth a stepchange more than it is carried at on the balance sheet for and a factory in the deep south of the US thrown in for free.

It all comes down to opportunity costs. We are working on a number of larger prospects that could require a reasonable sum of money to be available in the near future, and if these work out, I expect the return on the marginal capital will be a good deal better in these ideas than I view the prospects with MHI  – Tony Hansen 21/08/2015



Apr 1st 2011

Jul 1st 2015

Current Price

Since July 1st 2015

Since Inception

EGP Fund No. 1












EGP Fund No. 1 Pty Ltd. Up by 1.24%, leading the benchmark by 3.79% since July 1st 2015. Since inception, EGP Fund No. 1 Pty Ltd is Up by 87.98%, leading the benchmark by 55.02% all-time (April 1st 2011).

*1 after a 31 May 2013 dividend of 2.333 cents per share (cps) plus 1.000 cps Franking Credit, a 31 May 2014 Dividend of 7.000 cps plus 3.000 cps Franking Credit and a 31 May 2015 Dividend of 8.6667 cps plus 3.7143 cps Franking Credit

*2 calculated based on dividends reinvested