Bellamys Organic

Bellamys (BAL) listed in the ASX in 2014. While agriculture related businesses seem appealing on the surface, they have for the most part been unattractive investments, in part due to the cyclical nature of the industry. What we liked about Bellamys was that it operates as an organic certification and marketing system and was not directly engaged in the production of the raw ingredients, therefore not directly exposed reliant on commodity pricing and economic challenges of farming. At the time of listing it was profitable and sporting high profit margins and returns on equity, even as a small company with a market value of ~$130Mn. It has a range of organic infant milk products which in addition to its established local distribution channels also started to benefit from the ‘clean green’ trend in Asia, with Chinese buying being the main catalyst. From an entry price of $1.42 in Sept 2014 the stock achieve ten-bagger status (ie. increase in value of 10 times) by the end of 2015. With such a rise in a relatively short time period part of the holding was sold at $7.50 and was still trading in the $10-12 range in early 2016. It achieved a +$1Bn market cap and entered the ASX200, further stabilising its investor base. Update Dec 2016: Another part sale of the holding at $12, partly on Chinese regulatory concerns, leaving a 'free carried' 25% of original holding. In December, following a profit warning and ongoing uncertainty in China the stock was sold at $6.85, a 43% fall in one day. Update Mar 2018: Following a management shake up and increased Chinese regulatory certainty and accreditation the stock recover to over $20, residual holding was sold based on valuation. Moral of the story: take profits when a growth stock doubles or there is a short-term 'excess' unrealized gain. Leave some money on the table, ride the houses money, so to speak.

Afterpay (APT.AX) is a fintech company operating in the ‘buy now, pay later’ market offering a modern day version of the traditional lay-by purchase method – in effect a reverse lay-by system of particular appeal to millennials who wish to better manage their finances and avoid credit.
Shares first purchased late 2016 at $2.80 and went on to double at which point part profits were taken. It continued to be held following a strategic investment made by U.S. venture capital firm Matrix Partners in Jan. 2018 coinciding with entry into the U.S. market. With strong revenue growth on the back of strong merchant and consumer acceptance part profits were again taken at ~$12. Stock was subsequently purchased again following a re-assessment highlighted by a ramp up in activity in the U.S. and UK markets based on strong merchant engagement and low customer acquisition costs. Despite the rise in share price to over $20 the investment case was further strengthened on news that the Afterpay was being made available beyond online into brick and mortar stores.
Whilst the company was not immediately profitable during this growth phase, forecast revenue growth backed by strong execution justified forward PE valuations, underpinned by forecast earnings growth (ie. favourable PEG ratio). This measure was regularly monitored along with the company’s external operating environment.
APT is a classic example of a Peter Lynch style investment, where one could have easily tried out the product at a very early stage and noticed broader commentary surrounding millennial’s behaviour and changing attitudes towards money and credit.
MINT PAYMENTS
Afterpay is a more consumer-oriented play, different to that of our 2011/12 success Mint Payments (MNW) which started as an technology enabler in the merchant’s space. This was Longvue’s first ‘ten-bagger’ investment (another reference to Peter Lynch) MNW was an early niche play which operated in what became a very crowded and competitive mobile payments space. Worthy of a mention as the same investing disciplines apply including the taking of profits in an constantly evolving and disruptive technology environment.

Lake Resources (LKE) aim has been to disrupt the global lithium-ion sector with its technology partner Lilac Solutions unique and highly efficient, 'clean', low cost and scalable technology on lithium brine. It has been focused on delivering high purity lithium via sustainable clean extraction technology at its flagship Kachi lithium carbonate project, one amongst 5 projects in total (4 brine; 1 hard rock), all 100%-owned within Argentina’s “Lithium Triangle” which is responsible for ~40% of global lithium output. LKE has been unlocking value via continued site development with its partnerships. US Lilac Solutions, LKE’s technology partner at Kachi, backed by Bill-Gates-led fund, Breakthrough Energy Ventures, MIT's Engine fund plus other notables including Jack Ma/Michael Bloomberg/Jeff Bezos. (These facts are not an exercise in ‘name dropping’ but vindication of the interest and demand in the sector and specifically in the value proposition in applying direct extraction technology to the Lithium space to produce a high quality ‘clean’ product). Lilac’s ion-exchange water treatment beads eliminate salt-lake need for large evaporation ponds used in conventional brine operations, allowing water to return to source while producing faster, scalable & sustainable high-purity 99.9% lithium. This is deemed suitable for the latest batteries used in electric vehicles (EV). Samples from Lilac’s lithium chloride pilot plant was evaluated by potential off-take partners and tested in batteries by Novonix labs (another Longvue portfolio investment (NVX.ASX). Although not a reason as an investment case (or ‘Pavlov’s dog’ theory at play) we did previously have success with Orocobre (ORE.ASX) which we invested in at IPO @ $0.20 in 2007 which went on to become a very successful investment. An additional point of distinction for a commodity style play like is the use of innovative technology. We bought into LKE at ~$0.08/sh (late 2020) and although selling psrt of the windfall to cover the initial purchase we decided to continue adding to portfolios at $0.30-33/sh as U.S. institutional funds invested in Feb. 2021. We felt these strategic investments underpinned the LKE share price. The company soon after announced a plan to double the production at Kachi and received approvable from the UK and Canadian credit insurance agencies to fund the projects. On that basis we were comfortable in adding to our exposure at $0.50-60/sh and to take advantage of the company ‘s announcement mid 2021 of a Bonus share offer for existing shares exercisable at $0.35/sh (Oct’2021 and $0.75/sh (Jun’2022). As of Nov’2021 LKE was trading in the $0.90-1.00 range. Longvue continues to hold LKE leading into 2022 and is firmly held across portfolios. UPDATE: we continued to stay invested in Lake as a great story turns into reality with a very focused and committed management team.

Mothercare

This was a small investment in 2011 in a company looking to consolidate the baby care retail market with an affiliation with Mothercare (UK). The company was not yet profitable and in aggregation mode. This was private equity style deal that was playing out in the public market with backing of some smart money - the retail savvy Myer family and a noted boutique fund manager. The company went into administration in 2012. It provided a few lessons in that while it is re-assuring to invest alongside the smart money, sometimes even the smart money gets it wrong.

Vocation

A small investment was made in this education company as a leading play and consolidator in the growing education services sector in Australia. Similar to the previous experience with Mothercare it showed the risks involved in executing an industry 'roll up' or aggregation strategy, the perils of financial leverage and the effects of a loss of confidence when emerging companies falter. It also provided evidence that having well known, experienced investors and board members, whilst useful, is no guarantee of success. In the case of Vocation, chairman Peter Dawkins was a former federal education minister and treasurer. The young entrepreneur's bright coloured socks may have been another sign (although not initially noticed). Another risk to note here is to be wary of any business that is reliant on government funding and regulation.