News - Equities
Investec Asset Management's Alastair Mundy has revealed buying JJB Sports five years ago was the biggest mistake of his investment career.
At the Morningstar Investment Conference yesterday Mundy (pictured) said fund managers can afford to make mistakes sometimes but this one is especially prominent for him.
"My worst mistake was investing in JJB Sports about five or six years ago. It looked good at the time it had plans to roll out health clubs, introduce more big brands in-store and start paying a dividend.
"We just thought it was a bit down on its luck in terms of share price," Mundy said.
However, the UK Special Situations and Cautious Managed fund manager did have concerns about the amount of money the firm was spending. He wrote to the chief executive, despite not normally meeting with the management of companies he invests in, suggesting the firm not pay a dividend.
"This was politely ignored even though the share price was falling. I learned not to get involved in shareholder activism, it is time consuming and wastes money.
"If you do not like what the management are doing, it is time to move on."
The sports firm nearly collapsed last year but recently secured a £30m investment package from US group Dick's Sporting Goods.
Mundy, who buys stocks out of favour with the market, also said he believes Tesco is not yet a 'buy' despite the huge falls in share price and a difficult trading period the group has seen in the past six months.
The grocer suffered its worst Christmas on record for sales and issued a profits warning earlier this year. The share price has fallen 19.7% in the past 12 months.
Mundy said: "We have just had a real heavy look at Tesco and we think it is a bruised franchise - the balance sheet is ok but it has made a few mistakes.
"What concerns me is it is not doing well in international markets. In countries like Korea, Tailand and Poland it is really struggling and in the UK it has been taking advantage of the customer for many years. People are leaving Tesco because they feel ripped off.
"It is earning high margins to fund business internationally but these are not doing well. We are not buying yet, we are watching from the sideline," he said.
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