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1. Takeover territory​…

It was one of the busiest years on record for corporate activity in Australia, with over $300 billion in announced M&A and over $12 billion worth of IPOs hitting the local market. 179 companies listed on the exchange, the most in decades. But it was an interesting time to be a takeover target. We saw Afterpay get taken over, in the biggest transaction of the year ($39 billion), but due to a scrip bid from the US listed Square, the stock was a market performer versus pre bid!

Even our own Oil Search, with a takeover, performed in line with market. We think the outlook for energy is bright and are excited about 2022 as a chronic undersupply is underway, maintaining our high conviction position in the combined SantOSH.

Afterpay Share Price

Source: Bloomberg

2. More Tiiimber…

The timber price has bounced back again recently, as seen in the chart below on US lumber which is mainly used for framing houses. This has been on the back of a couple of factors:

  1. Increasing demand – the backlog of houses to be built is just getting bigger! Despite the increasing chatter about interest rate hikes the US homebuilder share price index is exiting 2021 at record highs and a 48% return over the year
  2. Wood as a sustainable building material – there are now 18 storey high buildings made just from wood, no concrete or steel beams!
  3. Supply may start to get constrained as carbon prices increase – revenue is earnt by storing carbon rather than harvesting for the wood.

If you’re wondering how you can get exposure to some timber, the Firetrail S3 Global Opportunities Fund holds a high conviction position in Weyerhaeuser, the largest forest owner in North America!

Lumber Price

Source: Bloomberg

3. The wind beneath ESG…

ESG tailwinds was the BIG thing for small caps in 2021. Many small cap stocks are beneficiaries of the ESG tailwinds including those stocks exposed to the raw materials required for decarbonisation. These stocks helped propel the small cap index to a ~18% return CYTD. Many of these stocks were 2, 4 and even 6 baggers over CY21!

Carbon drove most of our Firetrail engagement on the “E” in ESG during the year. Pleasingly, many of our companies released sustainability reports and emissions targets/data for the coming years. The price of Australian carbon credit units rose from around A$16/t in early 2021 to A$45 by mid-December driven by demand from companies seeking to offset their emissions (and financial market participants). Corporates are moving ahead of legislation in order to meet climate targets and this is creating large opportunities across our investment universe.

IPO and pre-IPO opportunities were plentiful during the year. The Firetrail small cap team looked at over 100 separate transactions and participated in 14 IPO’s. We also invested in one pre-IPO opportunity, Xpansiv. Xpansiv is the largest global voluntary carbon market trading platform and 2021 saw volumes increase by some 300%. We believe this is just the beginning and are excited for Xpansiv to debut on the ASX in 2022.

Source: Firetrail, ACCU

Chart of the Year

It’s a big call to make, but we can’t go past the tidal wave of money that has come into equities this year. Inflows to equities exceeded the combined inflow of the past 19 years! Excuse our language, but “BTFD” was probably the most overused word of the year too!


This article is prepared by Firetrail Investments Pty Limited (‘Firetrail’) (ABN 98 622 377 913, AFSL 516821) as the investment manager of the Firetrail Australian High Conviction Fund (ARSN 624 136 045), the Firetrail Absolute Return Fund (ARSN 624 135 879), the Firetrail Australian Small Companies Fund (ARSN 638 792 113) and the Firetrail S3 Global Opportunities Fund (ARSN 653 717 625) (‘the Funds’). Pinnacle Fund Services Limited ('PFSL') (ABN 29 082 494 362, AFSL 238371) is the product issuer of the Fund. PFSL is not licensed to provide financial product advice. PFSL is a wholly-owned subsidiary of the Pinnacle Investment Management Group Limited (‘Pinnacle’) (ABN 22 100 325 184). The Product Disclosure Statement (‘PDS’) and Target Market Determination (‘TMD’) of the relevant Fund are available via the links below. Any potential investor should consider the PDS and TMD before deciding whether to acquire, or continue to hold units in, the Fund.

Links to the Product Disclosure Statement: WHT3810AU, WHT5134AU, WHT3093AU, WHT7794AU

Links to the Target Market Determination: WHT3810AU, WHT5134AU, WHT3093AU, WHT7794AU

For historic TMD’s please contact Pinnacle client service Phone 1300 010 311 or Email

This communication is for general information only. It is not intended as a securities recommendation or statement of opinion intended to influence a person or persons in making a decision in relation to investment. It has been prepared without taking account of any person’s objectives, financial situation or needs. Any persons relying on this information should obtain professional advice before doing so. Past performance is for illustrative purposes only and is not indicative of future performance.

Whilst Firetrail, PFSL and Pinnacle believe the information contained in this communication is reliable, no warranty is given as to its accuracy, reliability or completeness and persons relying on this information do so at their own risk. Subject to any liability which cannot be excluded under the relevant laws, Firetrail, PFSL and Pinnacle disclaim all liability to any person relying on the information contained in this communication in respect of any loss or damage (including consequential loss or damage), however caused, which may be suffered or arise directly or indirectly in respect of such information. This disclaimer extends to any entity that may distribute this communication.

Any opinions and forecasts reflect the judgment and assumptions of Firetrail and its representatives on the basis of information available as at the date of publication and may later change without notice. Any projections contained in this presentation are estimates only and may not be realised in the future.

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