Star stock picker Kerr Neilson isn’t afraid to admit when he’s wrong. Three years ago, he refused to believe that women would never want to buy their clothes and shoes online, only to watch internet-based retailers for women become the most popular websites in the world, facilitating enormous sales volumes daily.
“Three-to-five years ago, I would never have believed it possible but now it’s one of the fastest growing areas of e-commerce,” he said. “Women realise they don’t have to traipse into town and find a park, and delivery is so fast these days.”
Neilson, founder and managing director of Platinum Asset Management, is determined not to miss buying opportunities in the technology space. The “coming of age of the internet” is changing the way retailers and service providers market to consumers and engage in e-commerce, he said, and it’s also changing how retailers use their showrooms and retail shopfronts.
The two-way line of communication that the internet and mobile technology has enabled will see “certain sectors become obsolete, other sectors grow, and others will be damaged.”
Information technology is one of the most exciting sectors for Neilson, who acknowledges that memories of the tech wreck at the turn of the century are still fresh in many investors’ minds.
That is one reason why technology stocks are still relatively cheap, he said.
“People are still scared of technology companies, but as professional investors we can’t defer to our clients. We still make mistakes sometimes, but one way of managing risk is to have a more diverse number of holdings,” he said.
Neilson, whose flagship Platinum International Fund has outperformed its benchmark by 7.7 per cent since its inception in 1995, said the portfolio increasingly included less well known stocks and brands in the mid-cap space.
“We are moving to under-discovered and under-priced companies, and some are names that few people have heard of,” he said.
He added that the inflated prices of some blue-chip stocks were a reflection of fear among investors rather than a mirroring of better management, growth and stronger profits.
He said scared people invested in companies that they perceived “have always been good investments in the past”, not because profits were accelerating. In many instances, profits had disappointed, he said.
In August, Platinum Asset Management reported a 2-per-cent increase in net profit after tax of $129 million for the year to June 30, 2013.
As at July 31, 2013, the group had $20.54 billion under management.
The Platinum International Fund returned 47 per cent for the year to July 31, outperforming the MSCI All Country World Net Index by 5.7 per cent. Over the 10 years to July 31, the fund has delivered 8.1 per cent per annum, compared to the index, which returned 4.4 per cent.
Neilson said the group’s long-term track record across all of its strategies justified the investment-management fees it charged, which are considered high by industry standards. Last financial year, Platinum Asset Management pulled in $232 million in revenue, almost all of which was investment management fees, representing a 2-per-cent increase on the previous year.
Neilson said the group was flexible in how it structured its institutional fees, with the option of a performance-based component, but was not flexible with overall price.