Intelligent Investor doubles its money on Photon punt
When Intelligent Investor Funds bought 5% of Photon Group while the share price was dipping down to 3c in August, a commenter on Mumbrella predicted:
“These guys are either absolute genius’s or total idiots – time will tell.”
At the time, Steve Johnson from II Funds conceded: “It wouldn’t be the first time I’ve looked a total idiot – happens to most fund managers on a somewhat regular basis (which is why most of them rarely stray far from the index …. looking like an idiot when everyone else looks like an idiot is much more palatable than looking like an idiot on your own!)”
However, his brave course has paid off, virtually doubling the investment in five months.
Yesterday Johnson informed the ASX that Intelligent Investor Funds was no longer a substantial shareholder in Photon, having sold last week while the share price fluctuated between 5 and 6c – virtually doubling its investment in five months – and was no longer a substantial shareholder.
Photon agencies include BWM, BMF, Naked Communications, City PR, Frank PR and The Leading Edge
Tim Burrowes founded Mumbrella in 2008. He worked on Mumbrella until 2021. At various points he was editor, content director and editor-at-large.
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Unfortunately the story isn’t quite so good. We doubled our money on the ones we bought at 3 cents, but still own the millions we bought at 10. Overall Photon remains the worst investment since we started the fund.
Still looks cheap though. If Matt Melhuish can halt the exodus we’ll make more good returns from here.
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Thumbs up for the honesty Steve.
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Agree, we really appreciate the transparency. If only a majority of fund managers had the same tenacity. However, given Photon’s systemic issues, not least being the former CEO’s focus on asset stripping rather than genuine strategic change, why would you ever buy at 10 cents?
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Well that’s sort of what we do. As soon as I hear someone say “Why would you ever buy company XYZ, it’s [insert rationale for XYZ heading to hell in a hand basket]”, I get interested.
You could have used (and probably did use) the same logic at 3c per share. That was equivalent to $50m for the whole company; it now has $23m of excess cash in the bank and still owns BMF, BWM, Naked, TLE, Frank, Hotwire and a bunch of other minnows. Pretty good deal I’d say, despite all the issues you mention. It’s never going to be our greatest investment but I still think we’ll see 10c again.
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If it was right to sell at 6c, why not sell the lot? Is it the sunken value dilemma? Does it matter if you’ve bought them at 1c or 10c, if 6c is a good price to sell at, why not sell?
Either way, I agree, your $50m gets you a helluva lot of agency for the cash.
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