Why Platinum Asset Management’s Share Price Fell Today

Why Platinum Asset Management’s Share Price Fell Today

What Happened to Platinum’s Share Price?

Fund managed Platinum Asset Management’s [PTM:ASX] share price fell over 13% today, to around $8. Just a few days ago, the share price hit nearly $9.50. That’s a decent decline, but the share price had a very strong run before that. In October 2014 it was below $6!

Why Did This Happen to PTM Shares?

The run up from late 2014 saw PTM’s share price rise by around 60% in less than four months. Fundamentally the stock was expensive, trading on a PE ratio of over 25 times. Today, the company announced a slight fall in net profit, thanks to a bigger than expected increase in costs. The lack of profit growth combined with an expensive valuation saw the share price fall heavily.

What Now for Platinum?

Platinum is a very well managed company, but the weak profit result is a setback. Provided global stocks remain in a central bank induced bull market, Platinum shouldn’t suffer any major profit headwinds. Its funds under management are growing, which bodes well for future profit growth.

The share price rally from October last year was just too far, too fast. This correction just brings the shares more in line with PTM’s growth prospects. Having said that, I’d be reluctant to buy the dip here. After such a large fall you’re better off standing aside to see how the dust settles.

Regards,

Greg Canavan+
for Markets and Money

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Greg Canavan

Greg Canavan is a Contributing Editor at Markets & Money and Head of Research at Port Phillip Publishing.

He advocates a counter-intuitive investment philosophy based on the old adage that ‘ignorance is bliss’.

Greg says that investing in the ‘Information Age’ means you now have all the information you need. But is it really useful? Much of it is noise, and serves to confuse rather than inform investors.

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