The volatile trend meant that the quarter was unusually active. The main driver of performance was the growing interest in the commodities sector. Despite all the doom-mongering, China performed very well and the US economy remains sufficiently robust for there to be a general expectation that the Fed will hike rates.
We saw a sharp rise in interest in Australian commodities companies, but at present this is only reflected to a limited extent in the prices of small companies. The exception to this is gold mines, where there is now considerable speculative attention. We took the opportunity to sell several smaller stocks such as Cardinal Resources, Emmerson Resources, Oklo Resources and Sarama Resources. We also sold our positions in FAR Ltd and Sino Gas in the commodities sector, along with the longstanding holding in Venturex Resources. This was done on the back of rising prices and volumes. In industrials, the position in Automotive Holdings was sold at a very high price.
On the buy side we built up a respectable stake in BT Investment Mgt. This is the holding company for Hambro’s in London, which has for some time now been reporting good performance and inflows and launching innovative products. We established two positions in mining services, an attractive sector that we have not invested in for years! The long-term bear market in commodities has forced these companies to shrink back to “health” in recent times, and we expect to see sustainable increases in lowly valued companies like Macmahon Holdings and Swick Mining Services that are currently trading far below book. We took indications of a turnaround by the new management team as a sign to buy Kathmandu Holdings, an outdoor clothing retailer; this is a sector where we expect further growth. Finally, we purchased a position in the broadly diversified commodity miner S32 Ltd to benefit from rising coal and manganese prices.