The fund took on its last ever new investors this month. As I said in the September 2017 monthly letter, we consider the small investor group we will take forward with EGP Concentrated Value Fund to be like a club that had a very small window of opportunity to join. We will work intently over coming years to ensure the membership is a lucrative, enjoyable and valuable one.
Part of that value will come from our commitment to being more open about the construction of our portfolio. Now that the fund is closed to new investors, concerns we may previously have had that potential investors might (instead of investing) mimic our portfolio often caused us to be circumspect about our portfolio holdings. Now that the opportunity to join the EGPCVF club has passed, we are happy to discuss some of our portfolio ideas in more depth to assist our investors in understanding what we’ve invested your money in and why.
We will usually wait until we have completed our buying program in a stock before disclosing, but the first investment revealed since the inception of EGPCVF will be one we have been buying this month and may continue buying in future months if the story plays out as we expect and the pricing remains tempting.
Anyone interested in a snapshot of our investment thesis for our holding of Locality Planning Energy (LPE.ASX) can read here.
LPE.ASX is an investment that falls neatly into my investment circle of competence due to my many years spent working in the electricity industry. It is not a ‘moat’ business, but it is one that offers a compelling value proposition to its customers and in a period where electricity prices comprise a large and growing part of household budgets, we consider that an extremely useful tailwind.
Despite a good understanding of the industry in which LPE.ASX operates, it remains a business in the fairly early stage of its business model and as such warrants the caution we have displayed in the way we have sized the position so far.
The stock is our 10th largest holding at the end of September, and will not likely become a top five holding unless the profitability expands more rapidly than I have anticipated whilst pricing remains depressed, giving us the opportunity to accumulate a larger holding – Tony Hansen (05/10/2017)
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