Welcome once again to the monthly update for the CTHGPRO portfolio.
October is well known for being a wild month for markets so much so it still sends a shiver down the spine of many seasoned players.
October 2021 can best be broken up into a fortnight of gain and a fortnight of pain.
Campify led the portfolio higher with a solid 4C despite lockdowns and news of a new acquisition in New Zealand. The next best performer was Ansarada a company not mentioned before but as announced on my private tweet feed, it was one of the first companies we started buying for the portfolio. Ansarada with very low liquidity has taken the portfolio the longest time so far to build up a position.
I’ll now hand you over to “The Analyst” to tell you more about Ansarada, because as a famous market player once said. “I have no idea what they do.”
The Analyst Angle
Ansarada (AND) operates a SaaS model, providing a cloud-based software that allows all aspects of legal and financial transactions to be undertaken on a single platform. The company has achieved a growing and profitable business, serving a diverse customer base that regularly performs large or complex transactions. This customer base includes companies, governments, investment banks, legal and accounting firms.
Having completed over 24,000 deals globally, across areas such as M&As, capital raisings and IPOs, AND has been able to tap into the growing market opportunity, worth an estimated US$35bn.
FY2022 outlook.
By investing in data, tools and other features, AND has significantly simplified the signup and activation journey for their customers. This has helped improve their conversion rates. AND has further improved their operating leverage and completed a significant acquisition to accelerate their growth strategy and multi-product adoption with the comprehensive TriLine GRC Solution.
Financial Statement Overview:
In terms of financials, AND achieved total revenue of $10.2m in Q1 FY22, representing a 44% increase YoY. Whilst the company’s YoY cashflows were slightly down (-8%) to $2.5m, they have been improving their cash balance, now holding $23m in cash (+138% YoY).
ASX News
Outside of the portfolio, news has once again turned to inflation fears with the ASX selling off on rising bond yields running into the end of October.
Again I’d like to emphasize while I keep an eye on the macro it does not directly affect how the portfolio invests. We always keep in mind that macro considerations does indeed influence a large section of market players and this alone deserves our consideration.
Tiger Tantrum
This month I thought I’d write a little on position sizing for the CTHGPRO portfolio. As outlined in the first newsletter I believe in concentrating my bets, so I limit the number of holdings to 10 or less. At the same time unlike many fund managers I don’t believe it is possible to know which company will be my best performer as such I allocate and equal 10% to each position.
When first entering a position I use technical analysis or a near turn catalyst to start a 20% position (20% of the final 10%) if the price fall 20% I sell reassess my thesis and start again. If the chart confirms my idea or new information comes to hand to reinforce my thesis. I will aggressively add the remaining 8%. Picking winners is hard, picking which will be your biggest winner I believe is impossible.
This brings me to my next topic – Knowns and Unknowns
No matter how much you learn about an investment there will always be things you don’t know but generally it’s not the unknowns that will keep you from investing or which will force you to sell but more the knowns. Every single investor in this area is different, to me a known problem may not be a deal breaker but for another investor it maybe the one thing that keeps them from investing.
The sum of known problems and their validity in our mind determines the level of conviction you will possess in a given stock. The longer you wait to seek clarity on the knowns which bother you, the higher the price you’ll ultimately end up paying.
This brings to the reason I enjoy investing in early stage companies because to me it’s a competition of making decisions on very limited information both positive and negative for the new company. If you’re right, big returns are your reward if you’re wrong and you over commit too early, negative outcomes await.
That’s why I take my 20/20 approach when entering a new position.
October Performance
Pleasingly the portfolio was up 11% in August. This brings the first quarter of the new portfolio to a positive 46% return.
Top 5 Portfolio Holdings
CHL, CTT, PPL, CXL, AND (Random Order)
Current Cash Levels – Approximately 25 %
Again, I would like to advise all readers that nothing in this update is financial advice. Please do your own research and consult a financial advisor before investing in anything or even when choosing which shade white to paint your ceilings.
As always, the team at CTHGPRO would like to take this opportunity to thank me for trusting us with my money.
Regards
Alonzo and “The Analyst”
CTHGPRO Portfolio Connoisseurs
