Why Platinum Asset Management’s Share Price Fell Today

image description

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.


Greg Canavan+
for The Daily Reckoning

Join The Daily Reckoning on Google+

Greg Canavan
Greg Canavan is the Managing Editor of The Daily Reckoning and is the foremost authority for retail investors on value investing in Australia. He is a former head of Australasian Research for an Australian asset-management group and has been a regular guest on CNBC, Sky Business’s The Perrett Report and Lateline Business. Greg is also the editor of Crisis & Opportunity, an investment publication designed to help investors profit from companies and stocks that are undervalued on the market. To follow Greg's financial world view more closely you can subscribe to The Daily Reckoning for free here. If you’re already a Daily Reckoning subscriber, then we recommend you also join him on Google+. It's where he shares investment research, commentary and ideas that he can't always fit into his regular Daily Reckoning emails. For more on Greg go here.

Leave a Reply

Be the First to Comment!

Notify of

Letters will be edited for clarity, punctuation, spelling and length. Abusive or off-topic comments will not be posted. We will not post all comments.
If you would prefer to email the editor, you can do so by sending an email to letters@dailyreckoning.com.au