Bristlemoon Global Fund

Bristlemoon was formed when our founder, George Hadjia, returned home to his native Sydney after being based in New York City for more than five years. While in NYC, George built a valuable network of investor contacts as well as insights into how some of the world’s most successful investment firms operate. He saw an opportunity to bring this knowledge and experience back to the Australian market and implement those learnings by founding Bristlemoon. The Bristlemoon Global Fund gives investors the opportunity to have an experienced team looking after their investments. 

The Bristlemoon Global Fund is a global long/short fund that seeks to invest in a concentrated portfolio of high-quality businesses that have defensible market positions and can compound their intrinsic values at attractive rates over time. We document our research insights at www.bristlemoonresearch.com, showcasing the deep analysis we perform when assessing investment opportunities.

The Fund is available to Australian wholesale investors and applications can be made via our online application form.

Our mission is to compound our investors' capital at attractive rates over the long term. We seek to fulfil our mission mainly by investing in high quality compounder businesses that have the following characteristics:

• a highly defensible economic moat that widens with scale; 
• the ability to reinvest earnings at high rates of return; and 
• mispriced future earnings power

Our research-intensive fundamental approach is used to identify and invest in stocks that we believe have the highest compounding potential. While not a key focus for the Fund, we do have the ability to short stocks that we believe to be vulnerable to material price declines.

The Fund intends to have 10 to 25 core long investments from a range of sectors. 

The Fund will be able to vary its net exposure, with selective, opportunistic shorting of absolute return opportunities, as well as hedging overall Portfolio risk. The Fund aims to invest within a 70-100% net exposure range. 

The Fund will be comprised of publicly traded equity securities in both U.S. and non-U.S. companies. The portfolio will generally consist of securities selected from the following countries and regions: USA, Canada, United Kingdom, Europe, Hong Kong, Singapore, Japan, South Korea, Australia and New Zealand. Bristlemoon may invest in securities in other countries if it considers it appropriate to do so. 

Our investment philosophy is guided by a number of principles:

• Price does not equal value
• Stocks are fractional stakes in businesses, and intelligent investing requires an ownership mentality 
• The requirement for an adequate margin of safety and for a stock’s return profile to be asymmetrically skewed to the upside 
• Businesses require time to compound their intrinsic values, which requires a patient, long term mindset to remain invested and benefit from this compounding of value 
• Understanding and staying within Bristlemoon’s circle of competence 
• Conviction is essential to weathering stock price volatility and requires deep diligence of investment opportunities 
• Great investment ideas come along infrequently, and Bristlemoon seeks to concentrate capital in its most compelling ideas 
• Each investment opportunity requires a quantification of the opportunity; Bristlemoon seeks businesses that have strong return potential over a five year period  

Bristlemoon’s investment process seeks to identify companies that are assessed to have strong free cash flow per share growth profiles and which are trading at a discount to Bristlemoon’s assessment of intrinsic value. We believe that the free cash flow per share metric encapsulates what is economically important to equity holders, including revenue and margins, capital intensity, and any changes in shares outstanding. Additionally, we seek to identify companies where the free cash flow per share growth profile can be underwritten with a relatively high degree of confidence. 

The Fund’s investment strategy can be broken down into three parts: 

1. idea generation; 
2. the investment process; and 
3. portfolio and risk management

Idea generation: Bristlemoon generates investment ideas using a quantitative screening tool, in addition to organic idea generation. The quantitative screening tool is used to filter long and short investment opportunities based on criteria selected by Bristlemoon, helping narrow the Fund’s investible universe down to a smaller group of more compelling investment ideas. Bristlemoon will also generate investment ideas organically through daily research and analysis of existing and prospective investment opportunities, attending investment conferences and networking events, as well as via external research. 

Investment process: Bristlemoon’s investment process can be segmented into two parts: 

1. a mini analysis; and 
2. a full analysis. 

The mini analysis is to assess the attractiveness of the investment opportunity and if it is worthy of further analysis. This stage of the investment process is time bound and will typically be allocated 1-3 days for Bristlemoon to perform a preliminary investigation of the stock before making a decision on whether to pass on or proceed with the opportunity.  

The mini analysis involves a high-level review of the company’s financial performance and valuation, and involves an inspectional reading of 10-K/Annual Report/S-1 filings, earnings call transcripts, conference and investor day transcripts, expert calls transcripts, Internet blogs, Company resources, and other external research. 

The analytical output of the mini analysis is geared towards answering: 

• How does this business make money? 
• What are the key value drivers for the business? 
• Are there elements of business quality? 
• What are the key debates on the stock? 
• Is there a potential mispricing? 

If the stock cannot be ruled out, it is a candidate to be progressed to a full analysis. The objective of the full analysis is to build a comprehensive investment thesis that results in a recommendation to either invest, or to pass on the stock. The full analysis is a continuation of the work performed during the mini analysis and can involve the following: 

• detailed analysis of 10-K/Annual Report/10-Q/S-1 filings, earnings call transcripts, conference and investor day transcripts, expert calls transcripts, 
  internet blogs, company resources, and other external research; 
• conducting interviews with company management, former employees, competitors, consultants, suppliers and commissioning expert network proprietary surveys; 
• historical financial statement analysis; 
• valuation analysis including granular valuation build-up based on key value drivers; 
• constructing valuation scenarios and other relevant issues including but not limited to: 
  
  • incentives  
  • ownership structure 
  • insider transactions; and 
• conducting pre-mortem investigations, including questioning what would cause the Fund to lose money on the investment. 

Bristlemoon performs detailed documentation of its investment analysis which is stored in a database that houses the intellectual property of Bristlemoon. 

Bristlemoon requires time-stamped documentation of the investment thesis before an investment is made to avoid “thesis drift” – Bristlemoon seeks to document the reasoning behind each investment and under what circumstances an exit from an investment would be appropriate. 

Portfolio and risk management: Bristlemoon employs a robust and repeatable process for managing the Fund’s investment portfolio, including regular and ongoing meetings to review the investment portfolio. Bristlemoon also holds a weekly investment meeting which includes documentation of portfolio changes that occurred over the preceding week, the review of incremental data and news flow on portfolio stocks as well as other stocks of interest, and the flagging of material price moves that may warrant portfolio changes.

Bristlemoon also employs a stringent risk framework that seeks to manage risk and avoid outsized losses. On a weekly basis, Bristlemoon monitors key portfolio metrics such as gross and net leverage, portfolio concentrations, factor exposure, borrow cost and days to cover for shorts, as well as any hedging activities.

^{^} Subject to the Trustee’s absolute discretion. The Trustee may alter or waive the minimum amounts specified at any time without prior notice. All amounts are in AUD.
^* All numbers exclusive of GST.