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Friday, 9 March 2018
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New Trade: Platinum Asset Management

Platinum Asset Management (PTM) - We wrote this up the day after Kerr Nielsen announced his retirement and the stock fell 11.76% in a day. As I wrote at the time, and as Kerr Nielsen said, his succession has been planned and by the looks of it he probably hasn’t been picking any stocks recently anyway. That doesn’t stop the glass going half empty. Meanwhile, it is a quality stock with a return on equity of over 55%, and we bought it for the income fund before it went ex-dividend on March 1 (16c). My contention is that this sort of event has a temporary sentimental impact on the share price while the underlying earnings and the performance of the funds are largely unaffected.

At the time of the results and Kerr Nielsen’s announcement, a number of brokers dropped their target prices and turned negative. The interesting thing now is that the share price is trading at a discount to most broker target prices having fallen since the results from 786c to a recent low of 583c. Over the last couple of days, MACD (momentum of the downtrend) has turned, and there has, as of this morning been an RSI buy signal.

Here are the numbers on PTM. It has just gone ex-dividend, so the 7.5% yield is a bit irrelevant for the moment. But it is now on a market PE of 18.5 times which is cheap looking for a company which has a return on equity of over 55%. You can see that sentiment is against it with eight brokers with old or sell recommendations although the stock is now trading 30% below its year high and 4% below the average target price and intrinsic value. No gearing. It has been in a sentiment hole and looks to be coming out.

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