Q2, FY21 results

Q2 was another great result, even ahead of the strong rally on the index. My portfolio returned 20.46% in the quarter, against an index return of 13.76%. This means that Financial Year to Date my returns are 45.18% against the benchmark return of 13.65%.

I added 4 new stocks this quarter, and made small reductions in DMP and REH, which both ran up significantly. I added more FMG and KGN, both around the $17 mark, after share prices fell from recent highs, then trimmed my positions in both today.

The first of the 4 new stocks I’ve added are Kelly Partners Group (KPG) a conglomerate of several accounting firms mainly located in regional centres of NSW. I don’t understand this business well but I have a lot of confidence in the CEO Brett Kelly’s philosophy of incentives and looking after shareholders. He has a majority interest in the business. I added at prices between 1.20 and 1.30 and the share price finished up at 2.12 as at 31 December.

The second stock I have added is AVA Risk Group (AVA) who I consider to be well-priced, growing significantly, and in a business which I expect to receive a huge tailwind from future global uncertainty (remote monitoring, risk management, and transportation of value goods such as gold bullion).

The third stock I have added is Nuheara (NUH) who have been listed for a long time, with a somewhat bumpy ride. NUH seem very cheap at a market cap under $70M with a real product that is getting sales. Sales went backwards in FY19 and 20 but in the first quarter of FY21 sales had already outpaced the 2 prior full years. The recent deal with HP looks like good news and I plan to watch and see how things unfold for the business.

The 4th is a Brisbane-based mining engineering firm called Austin Engineering (ANG). They make after-market components for the mining industry like truck bodies and excavator buckets, optimised for the conditions of each customer’s mine site. ANG are tracking to report NPAT of $9M this financial year with a market cap of $98.6M. They almost went broke a few years ago but have done a great job turning things around.

It should come as no surprise that a significant amount of returns came from FMG, with the share price rocketing from $16.30 at the start of the quarter to $24. DDR, REH and KPG all made significant contributions to the return as well.

Turning to the future, I have concerns about the macro situation with the amount of money being pumped into the global economy and the high valuations on many equities, so I’m looking at ways to take some profits and either keep money in reserve or look to reallocate into new ideas. I’m sitting on around 20% cash and plan to review my remaining KGN and DMP position once half-year results are reported.

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