Smart Investor: Earning It, March 2011

Smart Investor, March 2011

Earning It

ROADTEST

Platinum International Brands Fund

Who runs the fund? Platinum Asset Management is one of Australia’s most successful home-grown international equities specialists. It’s best known for its international fund and its Asia, European and Japan funds. Simon Trevett is the portfolio manager on the brands fund.

The basics: The International Brands Fund invests in companies with well recognised consumer brand names – which, as Platinum puts it, “allows a company to earn superior profits from what otherwise might be a commodity.” The driver is globalisation, which Platinum believes will lead to mega-brands.

The process: The fund can hold 50 to 100 stocks with strong consumer brands, and are selected because the manager believes them to be undervalued. It can move to cash if the manager thinks that’s the right thing to do, and can also sell short – meaning take a position that benefits if a stock goes down. Top holdings are BMW, Pernod Ricard and Mulberry Group.

The bottom line: Lately, things have been going well, and in 2010 the fund topped Morningstar’s ‘global equity – blended’ category with a 15.9% return. This is the sort of fund that ought to work over the long term, and so it seems – over seven years it’s delivered 12.83% per year.

Fees: 1.54% per year, with a minimum entry level of A$20,000.

Verdict: The performance numbers clearly demonstrate that Platinum’s central thesis is working.

NEW FUND

All Star Maple-Brown Abbott Listed Property Fund

What is it?

A listed property fund

What sort of stocks does it hold?

The mandate covers real estate investment trusts (what we used to call listed property trusts), and also the stocks of property companies, whether property investment management, development or construction.

Is that a good area to be in?

Property trusts were very badly hit by the financial crisis, particularly those that had leveraged themselves heavily and accrued too much debt. But there has been a sense that this has created good opportunities to find value. Stocks like this tend to be good for income because they often have a high yield.

Who runs the fund?

This can seem a bit complicated. The All Star series of funds are operated by a group called Ventura Investment Management – the responsible entity for the funds – which in turn is a special purpose vehicle part owned by Professional Investment Holdings. But none of these groups are doing the stock selection: instead, they appoint specialist investment managers for each fund. In this case, it’s Maple-Brown Abbott, one of the very first wave of boutique managers that emerged in Australia back in 1984. It’s known for a focus on analysis, bottom-up research and value-style investing.

What are the costs?

The management fee is 0.79%, plus 0.1% in what it calls “expense recoveries”, and there is a minimum initial investment of $20,000.

GIZMO

iTwin

The iTwin is a simple piece of kit designed to help you keep two computers connected wirelessly no matter where they are. It just requires you to be connected to the internet.

Physically it looks like two USB flashdrives linked in the middle. And that’s really all it is: separate them, plug them into each computer’s USB port, and you’re linked, allowing you to share files and edits with a colleague on the road, for example. It’s also pitched up as a backup method.

iTwin is selling for US$99 on the company website (plus $4 mailing costs) and at this stage is only available on Windows PCs.

FUND WATCH

Prime Value Growth Fund

This fund has a long-standing track record of beating the broader market, over one to three year timeframes. It has done so through a strong focus on industrial materials stocks, which are getting on for half the portfolio, during a period that has rewarded those positions.

The top stocks roster is a curious one because BHP occupies three times as much money as any other individual stock. Alongside regulars like the banks (CBA notably absent), Rio and Wesfarmers, are some more unusual overweights, particularly Monadelphous Group, an engineering group geared to the energy sector.

The fund is well placed provided its core bet – that there’s continuing growth to be had in commodities and the ancillary businesses that serve that boom – remains on track. If it reverses, the fund would need to juggle its holdings pretty swiftly to remain in front.