June 2026 - Tech Triumphs and Tactical Trims. 19.2% Return Since Inception
Portfolio Return +4.45%. Top Stocks: MP1 +44%, ZIP +40%, 360 +38%
Another positive month of performance for Paper Mandate. The portfolio has strategically trimmed successful names (MP1), outright sold on thesis breaks (WTC) and deployed capital into new ideas (SYL). End of month cash levels are 10% as we remain conscious of the volatile macro environment (war, AI, and rates). Plus, it helps having dry powder.
Since inception, the fund has generated a Net Return of 19.2%. This is an alpha of 16.3% above the ASX300 Accumulation Index 2.9% return.
The portfolio continued to capture alpha through active management. Being overweight Technology (22.8%) vs the Benchmark weight (2.4%) contributed to performance. While our underweight to Materials (8.0% vs 27.5%) did provide a positive allocation effect, our stock specific exposure in OBM detracted from returns.
Portfolio Attribution
Our overweight allocation to Technology (22.8% vs. 2.4%) continues to perform, contributing 6.5% to the portfolio. This was due to MP1 (+44%), where we repeatedly trimmed the position as it grew, and 360 (+38%) recovering off its lows.
Interestingly, our Interaction Effect to Materials was positive (+7.0%) while the Selection Effect was negative (-9.6%). This is due to our large weight in OBM (-22.6%) dragging the portfolio and suggests we were correct in underweighting Materials but wrong on the we selected in that sector. The driving force of our return was Technology, which had a positive Allocation, Selection and Interaction Effect. Indicating we picked the right stocks and overweighted the sector correctly.
Another contributor to performance was Financials which added +1.2% to the portfolio and features a positive Selection Effect.
Avoiding Healthcare this month was a minor detractor, which we attribute to the final days of the month which saw Healthcare names outperform. In addition, we have not found any Healthcare names that we deem appropriate for inclusion.
An average Cash position of 11.0% created a minor -0.1% Allocation drag. We trimmed and added tactically over the month but prefer the safety net of a higher cash weight given the volatility geopolitically (US/Iran) and thematically (AI).
Portfolio Characteristics & Risk Metrics
The portfolio’s metrics are as expected. The current profile favours the mid-cap sweet spot, with the majority of companies between $1Bn to $5Bn in market cap.
The portfolio liquidity is well within risk parameters. Considering a 30% Average Daily Volume (ADV), the portfolio has a Days to Exit of 5 days. This is due to the small FUM size.
Other statistics include:
Weighted Avg Mkt Cap: $4,748m, slightly higher than last month. Smaller than the $9,826m of the ASX300.
WA Beta (1Y): 1.07, down from 1.11 indicating a less sensitive portfolio.
WA P/E Ratio: 23.4x, similar to last month but remains higher than the ASX300
20.8x trailing PE. Portfolio is more expensive given the holdings are on the growthy side.
At the end of the month, the largest overweight was Technology (+19.9% ) while the Materials (-17.2%) was again the largest underweight.
In difference to last month, we increased our Financials exposure to a) not be so dramatically underweight and b) taking the opportunity to add and buy positions ZIP, HMC, GDG.
Key Contributors & Detractors
The NAV increased 4.45% during June. The specific positions that drove the return by contribution were:
Megaport (MP1): Largest holding at 11%, returning 44.0%. Contributing 4.9%
Zip Co (ZIP): A 4.1% position returning 40.9%. Contributing 1.7%
Life360 (360): A 2.7% position returning 38.1%. Contributing 1.0%
Key detractors were:
Ora Banda (OBM): A 6.1% position, fell -22.6%. Detracting -1.4%
Judo Capital (JDO): A 4.0% position, fell -39.7%. Detracting -1.6%
Generation Development (GDG): A 3.0% position, fell -12.3%. Detracting -0.4%
Notable Moves
One of our technology stocks had a thesis break, WiseTech, whose Chair Richard White is being investigated for human trafficking. While the company made a statement that this was a personal matter for White, unrelated to the company, the brand is synonymous with him. We sold the position entirely on the news.
XRO continues to languish in the software selloff, however, we remain bullish on the core business, the expansion into the US, and that AI will not take over the need for a critical and dedicated accounting software.
We added Symal Group (SYL) to the portfolio which rallied 7.4% over the month (since our initiation). In that time the company acquired a national defence subcontractor, adding another vertical to its growing remit.
Outlook & Strategy
The 19.2% absolute return since inception is a fantastic trend thus far. While we are pleased with the performance thus far, we cannot rest on this minor laurel as the track record continues to build. The concern however are the allocations to Materials, as the gold price retraces further, we may need to reposition our weights or change into alternative names.
The focus for the coming month will be to again strategically deploy dry powder, trimming successful candidates like MP1, and monitor our detractors for either exits or top ups, specifically OBM.
Disclaimer: This is a paper portfolio. Content is for educational purposes only and does not constitute financial advice. Always do your own research.