Investing should make you uncomfortable, says Platinum
Limiting yourself to locally-listed companies rules out a wide range of industries and the potential upside they bring to a diverse portfolio, says Platinum’s Andrew Clifford.
Mentioned: Platinum International Fund (4505)
Tim Wong: Hi, I'm Tim Wong from Morningstar's management research team. Today, I'm joined by Andrew Clifford, Chief Executive Officer of Platinum Asset Management and Portfolio Manager of the Platinum International strategy.
Hi, Andrew,
Andrew Clifford: Afternoon.
Wong: Well, first things first. Maybe just to start with, maybe if you could just suggest to investors why they should be investing in global equities and what do you think when you hear investors talk about franking credits and familiarity when sticking with Australian equities?
Clifford: Well, the great thing about investing in global equities is that we have a huge diversity of opportunities that are out there whether that's both geographic, we can be investing obviously in countries like the U.S., but China, India. So, it is a much bigger opportunity set. And then, there's the diversity that we can invest in terms of industries; the great technology companies, the biotech companies. While we might have some of those types of businesses listed here in Australia, they are relatively small subset of what is out there nicely-valued stocks. As for franking credits, they are obviously an important part of returns to Australian investors, but you really just need to simply factor that into your assessment of the value of Australian companies. And ultimately, they are just part of the return and we have to look at the total return available, whether that company is listed in the U.S. or listed here in Australia.
Wong: So, with that said, can you briefly describe Platinum's strategy for investing?
Clifford: Sure. The Platinum investment strategy is simply based on the idea that we want to identify companies that are trading well below their inherent value. And by doing this we believe through time will give us very good absolute returns and good returns relative to the market. So, being part of that in how we seek those companies out is really looking at the areas that our investors love and avoiding those areas. So, when everyone is very enthusiastic about internet stocks, well, that's probably tell you that's a place you want to avoid. If they don't like commodity stocks, that's probably the place where the opportunities are at that point in time. Because as everyone crowds into one part of the market, stocks tend to get overvalued. And as they leave in other area, that's where value becomes apparent.
Wong: So, you mentioned earlier that the diversity and range of investments is one of the appeals of global equities. Does that potentially become a bit overwhelming at times give you've got such a scale in how you can invest and how do you try and overcome that issue?
Clifford: You know, there is a huge universe out there and trying to narrow it down to what companies you should be focusing on is a difficult part of the process. We have an investment team of over 30 people to help us do that. But even then, the scale is very large. And as I was saying, for us, what we really look out for, are these areas of the market that are causing people concerns or fears in recent times where there's been European banking crisis or concerns about Chinese growth. That tells you that this can be an interesting place to look at. And so, we use that filter to narrow the possibilities of where we can look. And of course, the other thing that we do is, we use quantitative screens where we have programs that look through all the financial datasets that are out there to help us also identify areas of good value in the market.
Wong: Doesn't sound like a particularly comfortable way of investing?
Clifford: Well, that's one of the things that we would always say about investing is that the really good investment decisions should be uncomfortable.