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 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. And, through the process of confirmation bias, you tend to sift the information that you agree with. As a result, you reinforce your biases. This gives you the impression that you know what is going on. But really, you don’t know. No one does. The world is far too complex to understand. When you accept this, your newfound ignorance becomes a formidable investment weapon. That’s because you’re not a slave to your emotions and biases. Greg puts this philosophy into action as the Editor of Crisis & Opportunity. He sees opportunities in crises. To find the opportunities, he uses a process called the ‘Fusion Method’, which combines charting analysis with more conventional valuation analysis. Charting is important because it contains no opinions or emotions. Combine that with traditional stock analysis, and you have a robust stock selection strategy. With Greg’s help, you can implement a long-term wealth-building strategy into your financial planning, be better prepared for the financial challenges ahead, and stop making the same mistakes that most private investors do every time they buy a stock. To find out more about Greg’s investing style and his financial worldview, take out a free subscription to Markets & Money here. And to discover more about Greg’s ‘ignorance is bliss’ investment strategy and the Fusion Method of investing, take out a 30-day trial to his value investing service Crisis & Opportunity here. Official websites and financial e-letters Greg writes for:

 


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