Investors love to find out about new growth opportunities and companies that may shoot up in share price, yet many times some of the best investment ideas are the ones that are already in front of us. I like to look for strong financials over the past 3, 5 and even 10 years to see how much staying power a stock has through good times and bad.
One that sticks out with consistent, steady growth is Platinum Asset Management Limited (ASX: PTM). This fund manager has been running funds since 1994, and has exhibited strong returns and high profit margins. I have four reasons why you might be interested in having it in your portfolio.
Good returns of its largest funds
The performance of its funds over the past year have been standout results. Its three largest funds are returning above 15%, with its largest, the Platinum International Fund, around 40% to date. Over the past three years, these three have generated returns between 10% -14.6% per annum.
Great increases in revenue and profit
The first half of FY2014 saw half year revenue expand to $160.9 million from $102.7 million in H1 2013, which led to a $105 million net profit, 68% more than in the previous corresponding period. Much of the increase in funds under management (FUM) came from investment performance, raising FUM to over $23 billion.
Financial performance
The company has a steady history of high key performance ratios. Net profit margins are usually in the high 50s, with 2013 at 58.4%. Return on equity and return on invested capital came in at 37.5% and 38.2% respectively in FY2013, and it holds no debt at all. This recurring financial strength is what investors want to see – steady and predictable earning power.
Dividends
Shareholders have had stable dividend income over the past five years. The H1 2014 interim dividend was increased to 14 cents per share, up from 8 cps in H1 2013, thanks to the great half year it had. Currently the dividend yield is 2.96%.
Foolish takeaway
Having a durable, relatively predictable source of portfolio income is sometimes half the battle for being successful in your investments. Over a long period of time, dividend income can make up about 40% of your total portfolio income on average, so steady dividend payment and growth is a must.
Platinum Asset Management has those, and that's why you should consider it for your portfolio.
