We have mentioned that we disposed of Buckle, Vera Bradley and Subaru. In addition, we sold LyondellBasell Industries and Delta Airlines and some smaller positions (Yuasa Trading, Ennis, Eastman Chemical). All were sold when, after updating our analysis on the release of new financial information, the businesses failed to meet our financial distress and/or quality rules. Our returns ranged from being immaterial (three months of wasted capital in the case of Ennis), to respectable (22.9% for Delta Airlines, 18.9% for LyondellBasell Industries and 17.6% for Eastman Chemical – each over a period of around four months), to what we view to be impressive (42.1% for Yuasa Trading over eight months or so).
On the buy side, we adopted a new position in Hawaiian Holdings, facilitated by the sale of Delta Airlines. For the two days prior to March quarter’s end, it temporary represented a larger position than ultimately desired as we were preparing for the known cash inflows to the Fund in April.
We have mentioned our purchase of Western Forest Products, a Canadian listed timber harvester. And perhaps we are a glutton for punishment. We have bought into another retailer, American Eagle Outfitters. We are also building positions in two other US listed companies – a wireless technology business and a chicken farmer.
We do like to highlight in each report the Fund’s composition compared to an index portfolio. We believe that if you pay for active management you deserve to get it. Based on our best estimates, of the Fund’s 27 positions, three are in the Index (with a combined weight of 0.40%). Therefore, our “active share” is over 99.6%. Although this may vary from time to time, we do not expect the Fund to ever meaningfully represent an index portfolio.
The Fund increased in size substantially on 1 April, as a result of our own additional investment as well as welcoming new investors. We thank the new investors for their trust and confidence in Alluvium. As Principals of Alluvium, we are honoured to accept the opportunity to manage your capital. Rest assured that the assets you have entrusted to Alluvium will be managed according to our high standard of ethics, with full transparency, no conflicting interests and with the same level of care and diligence as our own investments – they are, after all, in the same pool of assets.
Our quarterly updates are intended to be succinct. If you are interested in learning more, please simply send us an email. We’re always happy to meet and elaborate.
Best as always,