Fund manager reveals worst trade of the year — and lessons he learned

[Pelican Press 0]

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Fund manager reveals worst trade of the year — and lessons he learned

The Ranmore Global Equity Fund is no stranger to outperformance. Its fund manager, Sean Peche, has a track record in picking winners that have helped the fund beat the S & P 500 over the past two years without owning any of the so-called ” Magnificent Seven ” technology stocks. However, even well-run funds can face significant setbacks, Peche acknowledged. The fund manager identified the U.S.-listed Perion Network as its worst-performing stock investment of the year. “We thought it was the

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AdWords for

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,” Peche explained, describing their initial assessment of the company. Perion enables advertisers to place ads on search results like

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’s AdWords service. What went wrong? At first, the investment thesis seemed sound: Perion Network was closely partnered with

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‘s

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search engine, which was gaining market share thanks to its integration of ChatGPT, the artificial intelligence chatbot. The Perion’s financial position also appeared strong, with a third of its market value held in cash. As an ******** company not included in major stock indices, the Ranmore fund manager believed it might be undervalued due to reduced investor attention. However, the situation took an unexpected turn. “Unfortunately,

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changed their pricing strategy in digital advertising and the share price fell sharply,” Peche told CNBC’s Silvia Amaro on Pro Talks . In April, Perion disclosed that it expected revenues to fall to $590-$610 million in the first quarter, down from previous expectations of $860-$880 million – a significant ***** for a growth company. The company said the revenue fall was caused by a drop in search advertising pricing due to changes made by

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’s

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search engine. In 2023, short seller Spruce Point highlighted such a risk to investors. The Ranmore fund manager noted that the company’s cash reserves, which stood at $188 million at the end of 2023, provided some protection against further losses. The stock has fallen nearly 75% this year. PERI 1Y line Lessons learned The experience reinforced a crucial investment principle for Peche and his team. “That’s why we are not high-conviction investors,” he added. “Because you don’t know what the future is. You [have] a company with some smart ******** guys with lots of cash on the balance sheet and a growing market share, etc. Things change overnight.” The Perion Network position, which accounted for just over 2% of the portfolio, was larger than it should have been, according to Peche. This miscalculation highlighted the importance of diversification and risk management in a portfolio. Despite the setback with Perion Network, Peche ******** optimistic about other investments. For instance, he mentioned positive performances from companies like Nippon TV , which has risen by more than 50% this year. Opportunities Moreover, the fund saw opportunities in French companies following political uncertainty in late June, demonstrating its strategy of seeking value during market turbulence. “When [President] Macron announced the snap election, we were buying some French companies,” Peche explained. “There was an opportunity to acquire more because all the macro investors were going, ‘Oh, this is a disaster,’ and we were going, ‘Well, these companies are cheaper, and people are still going to the supermarkets.'” The fund’s June commentary highlighted Carrefour , a French-listed food retailer, as a specific beneficiary of this approach. Despite a 12% drop in Carrefour’s stock price due to election uncertainty, Peche’s team saw long-term value : “There was no change in Carrefour’s business model, nor its long-term

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, and regardless of the outcome of the French election, people will still need supermarkets in France.” CA-FR 1Y line That conviction led them to find the company “even more compelling” at seven times earnings and a 6% dividend yield. Ranmore’s fund returned 31% in 2023 compared with 24% for the S & P 500 . It also outperformed with 1.8% total returns in 2022, when the S & P 500 and broader indexes nearly fell into a bear market.

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#Fund #manager #reveals #worst #trade #year #lessons #learned

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