Quarterly Performance (22/05/18)

Please note: The performance figure is quoted net of any fees and expenses, but before taxes. The performance figure is annaulised.

Unfortunately, as I’ve been extremely busy recently I haven’t been able to produce a more detailed report. The half yearly review will be more detailed.

During the quarter, my personal fund produced a positive return of +7.5%. This takes the performance since inception (22/02/14) to +30.1% p.a.
 
Most of the gain during the quarter is attributable to the remarkable strength of Netwealth (ASX: NWL) rising ~36% over the quarter. This strength was most likely due to the Royal Commission which has probably accelerated the pace at which financial planners move away from the majors. Furthermore, given NWL is a tightly held stock, the rush of buyers have propelled the strength in the stock price. Macquarie Telecom (ASX: MAQ) also rose strongly over the quarter, rising ~25%. This stock has been sold out of the fund recently and so the full 25% wasn’t captured. The capital has been recycled into Redhill Education (ASX: RDH) which I still believe is grossly undervalued.

The quarter started off poorly mainly due to Afterpay (ASX: APT) but came back during the latter end of the quarter, ending only slightly down. APT released it’s US expansion announcement in May which was a strong one. Announcing a partnership with Urban Outfitters along with more than 50 other merchants with presence in the US. In FY18, Urban Outfitters had net sales of US$3.6bn of which ~38% were digital, which has grown strongly at a CAGR of 15% between FY13-18. This retailer alone (based on total net sales) is the same size as the total of the Australian online fashion market. Urban Outfitters has a minimum of 2-year duration for up to 5 years. Getting a retailer of this size on the platform provides confidence in the product going forward. The market opportunity in the US is significant and stands at 20x the size of the Australian market with sales of ~US$60bn vs Australia of ~US$3bn. Moreover, the US millennial market is ~63m people vs ~6m in Australia.

APT have also significantly strengthened their US management team, hiring 2 former Uber executives. Xin Ge will join as global chief risk and analytics officer from Uber, where he was head of risk management. Prior to Uber, he spent 14 years with eBay and PayPal. APT have also hired Akash Garg from Uber. He will be the chief technology officer of the US division and vice president of product. He was the director of engineering at Uber, and before that was senior director of engineering at Twitter.

Thanks for reading,
Chadd Knights


This article is general advice and is not intended to be personal advice. Before making any decisions, consult a licensed professional.