What happens when one of the best ASX shares in your portfolio suddenly becomes a stinker?
This is the dilemma that the Market Matters team faced in its Emerging Companies Portfolio.
Investment distributor Pinnacle Investment Management Group Ltd (ASX: PNI) gave Market Matters a 258% return in 12 months when its share price peaked in November.
Nice.
But since then the stock has almost halved, going from above $19 to $10.10 at Thursday's close.
Yikes.
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Dramas for ASX shares in investment sector
Market Matters portfolio manager James Gerrish explained that "all listed managers" in the investment sector had suffered in recent months.
But he believes Pinnacle is "somewhat different to the rest", taking a stake and providing backend services in a very diverse universe of fund managers — equity, debt, local and international markets.
In a not-so-subtle reference to the misfortunes of Magellan Financial Group Ltd (ASX: MFG) shares, Gerrish pointed out Pinnacle is "not just reliant on one star manager investing in one asset class".
"They have further capacity to scale up and with exposure across a variety of asset classes with a cross section of boutique managers," he said in his newsletter.
"It's likely to receive both a steady stream of performance fee and inflows in all market environments."
Add to portfolio now
Market Matters analysts are, therefore, bullish on Pinnacle and currently seeking to add to the portfolio.
"Performance fees, in particular, provide a free kick for growth if/when they come," said Gerrish.
"And with the core business already growing 10+% per annum, it's hard not to like Pinnacle after this recent pullback."
Capital H Management chief Harley Grosser told The Motley Fool last month that Pinnacle is one of the ASX shares he regretted not buying years ago.
"I think probably one that was in our wheelhouse that we missed because it was a bit big for us was Pinnacle Investment Management," he said.
"That's one that we probably should have been more across."
