Platinum Capital (ASX: PMC) has released the quarterly investment manager's report which showed that the company, by quite some margin, underperformed the market. Over the last quarter PMC's portfolio returned a loss of -0.6% and 7.3% for the past year. With global markets up 19.0% and 6.5% these returns lagged significantly behind broad market returns, over these respective periods.
How concerns around a potential slowdown in China have led to greater risk aversion among investors, exacerbated by a trade war with the US and rising US interest rates are highlighted in the Macro Overview this quarter. This means avoiding companies that face any degree of uncertainty, especially those that are seen as being potentially impacted by these issues. Instead, high growth companies that are considered relatively immune from these external factors are preferred.
Over the last six months, from high growth sectors such as internet, software and biotech, the result has been very strong stock price performance, while companies perceived to be more cyclical have lagged or been sold down. The only exception was of the energy sector where strong stock price performance has been driven by rising oil prices.
The trends observed over the last quarter, have been clearly demonstrated by those that detracted from and, the stocks that contributed to, PMC’s performance. Alphabet (+7%) and Schibsted (+23%), a Norwegian company were among the strongest contributors with strong positions in online classifieds in a number of markets. Glencore (-6%) and Sumitomo Metal Mining (-6%) were major detractors from performance included the metal stock.
In the areas that have performed poorly over the last 6 to 12 months, PMC’s lagging performance is largely the result of a far greater weighting. Notably with exposure to copper and nickel PMC’s portfolio has a number of investments in mining companies. At the end of the June quarter from 11%, PMC’s cash position was raised to 13% as of the end of September. Over the quarter, short positions were reduced slightly.
At close to 72%, the overall net invested position of the portfolio remains roughly unchanged. On face value, the portfolio’s net invested position is now at one of its lowest level since 2009, very conservatively positioned.
Compared with a 6.5 per cent gain for the MSCI AC World Index, the company's portfolio fell 0.6 per cent during the last quarter. Over the past year, three years and five years as well, in fact, the portfolio has underperformed the MSCI AC World Index.
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