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April 13, 2018

The are several definitions of stocks being ‘on the nose’. Some will never turn out OK, some will be fine as fundamentals come through and some, unfortunately, will go through mental torture with no clear path to recovery or ruin thanks to the great art of public perception.

Blue Sky Limited (ASX:BLA) is in the latter camp. We don’t own the stock but as soon as the Glaucus reports were released (US hedge fund who decided Blue Sky was not valuing its underlying investments correctly) we knew the intense elevation of scrutiny would burden the stock for some time to come, regardless if it is right or wrong. Blue Sky has had a remarkable run since listing which means the market gave it the benefit of doubt. A company whose revenue relies on uplifts in valuation of it investee companies is going to find ways to put a positive spin on its investments which in-turn endorses the management reputation. Each positive result effectively gives investors less reason to question the fundamentals and...

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