AFR having a Fnp field day

LHC and the price of Freedom

Neil ChenowethSenior writer

Dec 3, 2020 –12.00am

It takes a certain fortitude tosee a shareholding that was worth $746 million in January shredded and stillshell out a $45 million loan to the wreck of what was Freedom Foods Group tokeep the lights on, as Tony and Ron Perich havejust done.

It's not just a paper loss. The Perichs have spent$290 million on Freedom Foods shares, including $53.5 million since May 2019,only to see it all go pear-shaped last June. The Freedom Foods stake is held byArrovale, which is owned by the extended Perich family, so there's lots to talkabout at the Christmas dinner.

The Perichs' long-time backers, StephenAboud and Marcus Hughes of hedge fund LHC Capital,feel their pain. It's been a tough year for trading, when the best lack allconviction, as Yeats might say, but have bags of passionate intensity.

LHC Capital's Stephen Aboud andMarcus Hughes make conviction trading look hard. Tamara Voninski

Back in October 2019, while they were passionately defending another favourite stock, iSignthis, after the ASX suspended its shares over murky deals, LHC revealed it had rekindled its long-time romance with Freedom Foods, building a new position.

Freedom Foods was one of LHC's first"conviction sized" investments in 2012, at less than $1 a share,before selling down in 2014 for more than $3. Aboud explained to FSPrivate Wealth that it was Freedom's 25 per cent stake in A2 thatfirst attracted him, and the shrewd management.

That's the A2 stake Freedom Foods sold in 2015 for $93 million. Even well down after A2's peak in June, those shares are now worth $1.5 billion.

LHC has actually handled the pandemic well, bookingprofits from a shrewd hedging strategy in the March market volatility, with afew unexpected wins, like cashing in on Etherstack's wild price spike on June 30.

But the Freedom Foods wipeoutcomes on top of LHC's losses on iSignthis and Mosaic Brands. To misquote Oscar Wilde, to lose one investment may be regarded as misfortune; to lose two looks like carelessness. Lose three and you're an internet meme.

Neil Chenoweth is an investigative reporter for TheAustralian Financial Review. He is based in Sydney and has won multiple WalkleyAwards. Connect with Neil on Twitter. Email Neil at nchenoweth@copyright link.au