Aristocrat Leisure (positive impact) released their result for the first half of FY2021.
The result was pleasingly strong in all areas, especially in the returns to social gaming. The result saw most market analysts upgrade their earnings expectation and price targets by between 5 and 10%.
The ability for the company to continue to grow and adapt to a world that changes rapidly remains a credit to the business. 45 percent of Aristocrats revenue is now derived from social gaming - generating revenue from gameplay in some of mobile phone eco-systems favourite pastimes.
Two highly successful games, Raid and EverMerge together generated more US$300 million in revenue.
A relatively new addition to many clients' portfolios in early January the stocks has returned +33% since acquisition.
Costa Group (negative impact) held its annual general meeting.
It provided an update to trading in FY-21 as part of its meeting. The company has experienced pricing pressures, combined with labour constraints, along with weaker than expected table grape production. This has meant that the company expects performance in the first half of FY21 to only be marginally ahead of last year.
International earnings are expected to have improved and will be offset by weaker domestic conditions.
The second half will benefit from higher production in citrus (an “on year” alternate bearing) the pricing for this crop remains uncertain. Alternate bearing is the tendency of a fruit tree to produce a heavy crop (on-years) one year followed by a very light crop (off-year) the following year.
Costa Group is building long-term value in an industry which has fundamentally volatile pricing, the difficulties of prices in agriculture have turned many farmers hair grey. But the variations aren't systemic, they depend on vagaries of weather and supply, they don’t vary with the economic cycle per se. Investors with a patient approach can both hold across the volatility of short-term changes in the price of berries or avocados and exploit the short-termism of the market at the same time.
Despite the position being a long-term hold in our portfolio, we chose to sell 20% in the recent months at much higher prices, as the market forgot the risks of price volatility. And as you may expect, we feel the market overreacted to yesterday's news and took the opportunity to purchase some of this position back at what we saw as a discounted price.
Carbon Revolution (negative impact) announced that it expects to produce 1,800 fewer wheels in FY-21 than previously anticipated.
This has been a result of a key customer suspending vehicle production due to the ongoing semi-conductor chip shortage.
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