CV Capital – 31 July 2018

To my fellow shareholders,

We raised new capital in July and as a result issued 163,125 new shares. I took the opportunity to transfer more of my personal shares into CV Capital. As a result, most of my personal portfolio now resides in CV Capital. The way I account for these transfers is to adopt the close price of the transferred shares at the subscription date as the value of the new capital.

In terms of activity, we managed to put some money to work in July by mostly adding to existing positions. I also trimmed our position marginally in Steamships Trading (you can read my thesis here). Given we’re also building a position in another company with exposure to PNG, the combined portfolio’s exposure to PNG country risk was making me think about it more often than I would have liked. So I reduced it and am now more comfortable with the overall position.

Currently the portfolio comprises of ten positions with one position above 20% weighting, another two position between 10% – 15.5% weighting, six positions between 5-10% weighing and one position marginally below 5% weighting. These weightings are based on the equity portfolio and exclude cash. Last month I assumed that our largest position will be diluted with the capital raising, however the stock went up in July and therefore still maintained its above 20% portfolio weighting.

Overall, the portfolio’s returns increased by 3.7% in July (compared to June). This increase was primarily driven by an increase in our top two weighted stocks and also a recovery in the share price of a losing position. We also received some dividends which contributed to the return. Although I have been reporting CV Capital’s performance on a month end basis, I’ve done it mainly for the purposes of transparency. CV Capital’s objective is to beat the benchmark over the long term (3-5 years) and therefore I place little emphasis on the current performance given the short history.

The table below shows our performance (before taxes) from inception to 31 July 2018. I have not prepared these returns on a compounded basis to make it easier for you to rework the calculations. Our cash position is circa 12% of the portfolio.

 15 Jan 1831 July 18Gross dividends
(cumulative)
Return (incl
franking)
CV Capital1.001.08608.6%
Benchmark STW56.758.811.2595.9%

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