Shares of prominent money manager, Platinum Asset Management Limited (ASX: PTM), are amongst the ASX's worst performing stocks today, down 13%, following the results of its half-year results yesterday evening.
For the six months ended 31 December 2014, Platinum reported total revenue of $166.5 million, up 2.4% on the prior period, whilst profit fell 3.95% to $100.9 million.
Whilst average funds under management rose 13.6% to $24.3 billion, it was a slight creep in the group's cost base which sent profit slightly lower.
The company's board has declared an ordinary dividend of 17 cents per share (fully franked), down from 20 cents per share last year, but announced a special dividend of 10 cents per share, fully franked. Taking the total payout to 27 cents.
Should you buy Platinum shares?
Looking ahead, the group's exposure to Asia and further weakness in the Australian dollar could help results. Recently Platinum also updated the market, advising that funds under management have grown to $27.16 billion, up 5.5% on a month earlier. With many of the company's funds outperforming their respective benchmarks, a greater amount of assets under management does bode well for future returns.
However, personally, I wouldn't buy shares in Platinum because they appear quite richly priced and could currently be at the top of a market cycle. The current bull markets won't go on forever and with Platinum shares trading at 27 times earnings, its share price could be heavily leveraged to a significant market fall or economic downturn.
Since all fund managers are leveraged to global investor confidence and to a lesser extent performance fees, now probably isn't the right time to buy shares in such a business.
