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February 22, 2024
PI Global Investments
Hedge Funds

Hedge fund LHC Capital buys Resmed, Lottery Corp shares

LHC said it continued to research and monitor the company’s developments. The stock firmed 1.1 per cent to $26.81 apiece on Tuesday.

Betting on the lotto

The Lottery Corporation is another new addition.

“It is our understanding of the lotto business that large jackpots drive a disproportionate amount of ticket sales, so we find it intriguing when a run of short-term jackpot wins leads to a material devaluation of the long-term value of the Lottery Corporation,” the hedge fund said.

During the second half of 2023, LHC said, a “run of luck” of jackpot wins, against mathematical odds, resulted in a lower number of larger jackpots and triggered broker downgrades and a sharp fall in the share price.

“We expect at some stage for the math to hold and a run of large jackpots to occur, which we suspect will lead to sell-side upgrades and a rising share price.” The hedge fund said it bought into the lotto operator at “reasonable prices”. The stock also helped lift LHC’s annual return.

LHC noted that its new positions established last year added to just under a quarter of the total return achieved for that period. Other stocks include long positions in online luxury fashion retailer Cettire, imaging technology company Pro Medicus and MA Financial.

The portfolio managers noted that their short book produced “considerable alpha” despite the backdrop of a rising market in 2023.

Mr Hughes told The Australia Financial Review in October that the fund shorted embattled airline Qantas, betting the value of its shares would fall when ex-chief executive Alan Joyce sold down $17 million worth of stock in June.

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