Kerr Neilson explains how Platinum seeks to grow clients’ wealth by applying, with discipline, a contrarian approach that emphasises logic and method while avoiding emotions and herding.
In a world where the media, business people and the general public seemingly expect the Government to solve every problem, it is easy to forget that in fact, it is private enterprise that is the source of wealth, not the taxing powers of bureaucrats. The stock market represents this engine of creativity and material progress and regardless of what governments do, ultimately global stock markets will be a long term store of value.
We at Platinum understand this and have the performance to prove it. In the last 19 years an investment of $1000 in the Platinum International Fund would now be worth over $9,000, the same amount invested in the MSCI World index would be worth $2,500. This is an unusually good record and while it could be attributed to good fortune, studies show that over this length of time, luck would generally have run out. There is a system at work here. This is further verified by the outperformance over time of each and every Platinum Trust Fund.
We know how to invest, we understand that the market is driven by fashion, fear and greed. These are deeply etched aspects of the human psyche and we try to control our own and exploit others. Combine this with a team of highly experienced professionals who are supported by powerful quantitative tools and the battle of wits tilts in our favour. Periodically we will face difficult times because there can be a lag before the market recognizes the inherent value of unfashionable, neglected companies. This is the antithesis of momentum investing that is favoured by many.
Our approach emphasizes logic and method rather than emotion and herding.
It’s in our DNA. Not everyone has this!
We immerse ourselves in real businesses finding out what really makes them tick. This is not the superficial understanding portrayed by the popular media which invariably eulogises about companies at their peaks. To develop this level of understanding requires a certain mentality as well as the skill of weighing-up the virtues and vices of each opportunity. In particular, looking beyond the short-term turbulence of the market and emphasising the long term vistas of opportunity. By its nature the outcome cannot be certain, but hard work, attention to detail, respected peer review and a co-operative team environment is what makes it work at Platinum Asset Management. We can tell you all about the daily realities of hours of meetings, the spread sheet analysis, the factory floor visits, the harnessing of expert consultants, the days of travel, but what really counts is one’s mentality. This is part of Platinum’s DNA.
Once an idea has been developed it is offered to the team for peer review and critical appraisal to test for myopic biases. This may involve a robust exchange of views because the purpose of these meetings is not necessarily to seek consensus.
Now here is the problem, the fresh new idea may seem more alluring than one’s existing holdings but worse still, the price of the existing holdings will generally be very different from the price of entry. Do remember, price is all important. This is where the methodical and logical Platinum process kicks in. This can only be done well if there is a crisp synthesis of view on each holding.
Resulting from this process, you will gradually see the portfolio morphing from one area to another and generally from a sector that has become popular to another that is still under a cloud. The result is a unique and well-balanced portfolio.
This is the Platinum methodology, the Platinum DNA.
DISCLAIMER: The above information is commentary only (i.e. our general thoughts). It is not intended to be, nor should it be construed as, investment advice. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. Before making any investment decision you need to consider (with your financial adviser) your particular investment needs, objectives and circumstances. The above material may not be reproduced, in whole or in part, without the prior written consent of Platinum Investment Management Limited.