LIC & LIT Platinum Capital Limited (PMC)

Isn't it all about the income? The juicy dividend growth more than makes up for that choppy pictorial of price speculation. Now if I just post up the dividend history, oh wait ... disregard.

 

I like the global valuation philosophy enough to be considering the manager. Though I’m worried that Passive is a huge disruptor of what active can demand in fees going into the future.

PIF and PIXX seem like the logical structures. Much like Vanguard funds and relating ETF’s.

PMC now seems like an old-fashioned sub scale duplication of costs. (but that’s just my opinion) Its one distinguishing feature is that it is closed ended. Depending on how wedded the manager is to have a closed ended fund, PMC could probably be easily merged into PIF to eliminate any persistent discount in the future if necessary.

PMC as a eyes wide open active allocation - I don't have a problem.

 

Yes always a possibility but they’ve seemed committed to it over the years with periodic SPPs now and then. Anything other than the larger older style LICs and MIR I tend to favour investing more in the SMSF rather than personal names. Should an LIC closure result in a capital gain then it’s much less of a tax headache.

 

Magellan and Platinum: 10 years from now this is how the investing world has changed

 

Exactly the point I raised around May 2018 asking similar questions about PMC capital growth story and income growth story when compared against their stated returns on their website.

I failed to add 2 + 2 = 4 doing simple research I normally do. For example DUI AUI SOL CIN bring up their charts over 20 years and dividend history and anyone can easily understand. Not so with PMC even though it claims to have retuned nearly 12% pa since inception.

Looks like someone like @dunno can explain 12% returns since inception because I fail to understand.

See post 1 Listed Investment Companies (LICs) Q2 2018


See post 2 Listed Investment Companies (LICs) Q2 2018

Cheers
Oracle

 

Early on in particular investors were silly enough to pay a very large premium for PMC. This would distort the price chart noticeably in comparison with the NTA chart. But in the real world unfortunately price is what one gets. Dividends (reinvested) have been high at times mostly as a result of capital gains no doubt.

Here’s the NTA chart:



Another lesson in never paying a large premium for any LIC.

Most of our purchases of PMC have been infrequent when attractive NTA opportunities arose. So neither chart is an entirely accurate reflection of our returns.

 

Any idea at what price the shares were offered in 1994 inception time?

Cheers
Oracle

 

$1 I think. 25 years later now $1.43. Excellent capital gain. You should strongly consider selling IVV to buy PMC.

 

Just had a quick look at a sample of the NTA premium for PMC in the years prior to the GFC. For example in 2006 the premium was around 42%.

 

Capital growth compounded 1.44% annually over 25 years.

Dividends must be greater than 10% to achieve the stated returns of 12% pa since inception.

I must be missing something surely. Maybe that’s why I stick to indexing. I must be dumb to not see how great an investment PMC has been in the past and going forward in future. Dumb people like me don’t deserve out performance of active investing I should just be happy to get market returns.

Cheers
Oracle

 

He he. PMC relies on suckers like me who like our income. It’s mostly an opportunistic holding for me that’s very different to the index with a strong Asian tilt. I can go years without buying it till an opportunity arises. Besides poor old buggers like me and @SatayKing didn’t have the choice of listed Global index funds early on.

In general I favour global indexing over PMC nowadays. However PMC has come back onto my radar again recently given the terrible time it’s been for Value Mgrs with PMC drifting into discount territory. I had gone off it somewhat to be honest and wasn’t really intending to add anything much to it but decided it looked interesting again given the above.

As mentioned in an earlier post others need to understand what they’re getting into if interested in PMC. There could potentially be a lot more downside with this one?

 

I bought some PMC when I was first plunging into LICs. I already hold PTM directly. It ain't exactly kicking goals for me at the moment. Not planning on averaging down at this point.

 

I overlaid some passive funds that describe the factors/tilts present in how Platinum invest the PMC fund.

PMC 1.1% management fee plus 15% performance fee.
VVLU (Value factor) .28% Management fee, no performance fee.
VAE (Asia exposure) .40% Management fee, no performance fee.
VGE (Emerging Markets) .48% Management fee, no performance fee.



Start of the chart is start date for VVLU. As I was expecting, factors/tilts pretty much explain performance, at least until December then PMC falls out of the tree. Is this premium/discount changing? Or something else? Portfolio manager changed from Kerr Neilson a while back, is performance change something to do with that, timing is a bit delayed?

I haven’t scrutinised the return claims yet. Just posted the numbers off the Platinum site. I Will dig out the historical numbers for PMC, apply my acid test and report back in due course.

 

Acid, I think that’s the problem. Must have been on too much of the stuff for me to purchase PMC at all.

@dunno can you give me one days advance notice before reporting back on PMC so I can get my short orders ready?

 

A quick guesstimate is that there’s been very roughly more than a 20% change from premium to discount since around Dec 18 where your chart shows major divergence.

 

The chart comparison is very interesting but may vary at times given the comparison factor / tilt ETFs are “long” only? Also PMC can be quite active with currency management.

 

PMC Premium / Discount chart as at 31 Dec 18 where premium is near 20%:


As of today my quick guesstimate has PMC at around 9% discount. So since Dec 18 there has actually been approaching near a 30% change from premium to discount especially based on my purchase price yesterday and this morning.

Well done on the chart @dunno as that seems to match up reasonably well.

 

I am often puzzled by claimed performance vs what we can see in the market. I have heard that sometimes the inception date is several years prior to listing (i.e. the fund was running unlisted and was very successful - but cannot confirm). My finance Professor said- again not verified - that some shops set up 20 small funds and then list the one that did really well after 3 years - and kill the other 19. Again no evidence.

I have a small 8 year old legacy holding of PWC from before I was an ETF guy. Would like to offload now - but may not be wise (no CGT implications though ;-) One advantage is the franked distros, I guess they sell holdings and pay tax on the CG to get the credits - they certainly don't get them from offshore. Now I'm more interest in growth than income.

 

The returns on the website aren't based on share price when reinvesting dividends. So the stated returns aren't actually "investable" so to speak. There are plenty of tricks, as soon as a performance marker isn't investable (an investor can't access the stated returns) you might as well ignore it. What else is hiding that a fool like me is missing?

 

Of all my years of investing one thing I have learnt which I think is very useful is everything revolves around earnings(particularly Earnings Per Share). By everything I mean dividends and share price. If earnings/EPS are growing you will see dividends and share price follow.

See below charts of

SOL - Price went from $2 in 1994 to $22 in 2019




AUI - Price went from $2 in 1994 to $9 in 2019



DUI - Price went from $1 in 1994 to $4.60 in 2019



CIN - Price went from $5 in 1994 to $31 in 2019



We have already in LIC threads seen dividend histories of AUI/DUI and they have been fantastic. We can also see from SOL's website it has increased dividends in each and every year since 2000 so nearly 19 years. From what I see from CIN's website they have also maintained or increased dividends since 2002.

As you can see since earnings have been consistently growing for the above shares, so did the dividends and share price. Easy to add up 2 + 2 = 4

Cheers,
Oracle.