New CEO Andrew Clifford released a very brief update on 22 June on the Platinum website which I've copied below:
Beset by fears of trade wars and more, the stock market spring is again coiling. The opportunities are not unlike what we saw 2-3 years ago, which positioned us for the outstanding performance of 2017-early 2018.
Our last Market Update was in early February. Markets globally then fell sharply following a spike in volatility, and we thought markets might have set their highs following very strong performance in late 2017 and early 2018. That has turned out to be true, but many markets – the US, Japan and in Europe, have recovered well from their lows. China has not, and continues to sell off, along with many “emerging markets” including South Korea.
Markets are beset by fears of trade war, Chinese credit tightening, US dollar strength and emerging market weakness. Recall that two years ago markets were beset by fears of Chinese collapse, European banking crisis and Brexit/Grexit and so on. Now, as then, cheap markets and assets are getting cheaper.
Our holdings in Asia are performing better than their local markets by and large, but in many funds we are surrendering some of the outperformance of recent years. Prior to our strong performance from 2016 to early 2018, we noted that our portfolios resembled coiled springs: valuations were becoming simply too delightful to resist, while the high flyers we had eschewed flew higher.
Once again, the spring is coiling. Cyclicals like industrials, miners, shippers or autos are getting ever cheaper, in a world with mild, positive inflation and reasonable global growth. Our past experience has shown that holding a portfolio of stocks with such attractive valuations can result in good returns for investors.
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I find the timing of Clifford's note prescient, as watching what is happening in the asian markets I can't help but get a sense of deja vu. The main difference I see is that this time is that the Chinese government's response is much different - and for the better. There is much less of a knee jerk government response to market ructions this time round compared to 2015-16, which Kerr Neilson argued at the time argued was counter-productive. It looks like they learned to do less and just let the market do its thing and work itself out.
In summary, these numbers suggests to me that the opportunity is far greater now than it was back in 2015-16. The maturity shown by the Chinese government response and reforms implemented since also suggests to me that these ructions will be much more short lived this time round.
So last time through 2015-16, Neilson positioned their portfolio very very well to capitalise on the 2015-16 drop. This is demonstrated in the results in the calendar year for 2017, where their main fund, Platinum International Fund made a 25%+ return which beat the MSCI index by over 10%! Meanwhile the Platinum Asia Fund returned 35%+.
We could see more of the same if not better over the next 12-18 months.
PTM Price at posting:
$5.76 Sentiment: Buy Disclosure: Held
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