Peak Sport Products HKG:1968 10% Position Purchased

Peak Sport Products HKG:1968 10% Position Purchased

 

We built the initial Peak Sport Products position. We accumulated just over 33 million shares over the past 23 days at a cost just under $10.77 million. At the end of April 24, 2015, our Peak Sport position represents 9.8% of our portfolio at a value of $11.6 million. PC Jeweller and Zensar represent 9.7% and 5.3%, respectively. Cash represents the remaining 75.2% of the portfolio. Cash will decrease as we find additional investment opportunities.

 

We have instituted a new policy of not selling our position within the first year. If there is a significant change to the business fundamentals and/or management, we will reassess the investment case and potentially sell, but barring any significant events, we will not sell. This does not mean we will not follow the companies we purchase and recommend.  In contrast, we will continue to diligently report on all our portfolio companies.

 

There are a number of reasons for the new policy. It eliminates short-term capital gains tax. It also makes us think seriously about the business we are buying and eliminates any trading. We were hurt with our impatience in letting the PC Jeweller investment thesis play out. We were show a quick ramp in share price and felt uneasy with our position size (then 22% of the portfolio) and sold more than half of our position in PC Jeweller, despite the strength of the business, growth opportunities, and undervaluation.

The policy should really be no selling for at least three years as by this time fundamentals and market price should converge.  If our research is correct then eventually the investment thesis will play out.

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