Last week I wrote about the huge trend that has been developing over the last 5 years, with investors leaving active funds and moving their money to passive funds in search for lower fees and better returns.
If you missed that article and wanted to see if the active funds industry has a future, you can view it by clicking on: Is the active money management business becoming extinct?
Today we take look at two of the larger listed active money management companies in Australia to see how they are trending against the growing competition of passive funds.
Stocks in Review
Perpetual Limited (PPT) VS Platinum Asset Management (PTM)
The first stock we will be looking at is Perpetual (PPT) which is valued around AUD $2.19 Billion. The chart below is a monthly chart, and you can quickly see that PPT has had a great run and is in a strong uptrend.
From the lows of around $19.00 a share set in late November 2011, to the highs of $58.48 set in mid April 2015, the shareholder of PPT have experienced superior returns over the last 5 years.
After reaching the highs in April last year, PPT experienced a pullback in price falling back to just under $40.00 a share, where it touched that level a number of times. (Shown below as support level $39.75). Even though it experienced a pullback in price it was able to stay within its uptrend on a monthly basis.
In July this year PPT broke out (shown by the black circle below) and recently hit its resistance level of $49.50 and leveled off to close the month of September at $46.70.
Provided PPT can close above the $49.50 level on a monthly basis the next level of resistance is around $66.00 a share or $16.50 a share higher than its next resistance level.
Zooming in on a daily chart of PPT you can see below, that the stock is set to break out of the consolidation pattern that has emerged over the last few weeks. I have placed two rectangle boxes to highlight the possible outcomes PPT could go over the next few trading days.
Since PPT is in an uptrend on a monthly chart and daily chart, the likely outcome is that PPT will move to the upside in the near term, where the resistance level is also $49.50 a share. The same resistance level as the monthly chart. The likely of PPT heading for support level of $44.50 shown below is quite low.
Moving to the other stock in review, Platinum Asset Management (PTM) which is currently valued around AUD $2.95 Billion. This stocks fortune has not been as good compared to PPT with its recent price action.
Taking a look at PTM's monthly chart below, you can that the stock also enjoyed a strong run up in price from around $3.30 back in August 2012, to a high price of $9.50 a share in February last year. Since the incredible run up from last year highs, it has been a rocky road for PTM and its shareholders.
After reaching the highs of $9.50 a share PTM began to fall back to its monthly uptrend around the $6.50 level in September 2015, before reversing and rising again to just over $8.00 a share.
However PTM failed to continue higher along its uptrend, breaking its uptrend (shown below with a black circle) back in January this year closing around the $6.50 level. Things went from bad to worse after it reversed and closed below its uptrend on a monthly basis.
The stock continued to fall and closed at the end of the month of September at $5.04 a share, just below its support level which is a bearish signal.
If PTM is to confirm and close next month below the $5.04/5 level, its next level of support is at $4.40 a share or 64c a share away from the closing price of $5.04 a share reached on the 30th September.
In the unlikely event that it is able to reverse its downtrend on a monthly basis, the first level of resistance is around $5.75 level marked on the chart.
Looking at the daily chart of PTM below, you can see that the price action was not pretty for shareholders. Apart from the false breakout of the downtrend back in mid August this year when it reached a high of $6.19, the price of PTM has stayed within its downtrend.
Moving forward the two options for PTM are illustrated with the black rectangle boxes in the chart.
1. PTM breaks out of its downtrend and heads to its first resistance level of around $6.00 a share.
2. The support level of $4.90 a share is crossed, and the next support level is $4.40 a share.
Given all the bearish signals of PTM and its downtrend chart pattern, the most likely option is for option 2 to occur.
Even though both stocks are in the exact same industry, they are trending in opposite directions. This is why its important to view both the long and short term trends of a stock, as well as continuing to monitor the current price action to see if the trend has actually reversed.
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To see the trading books click on the link to the : Trading Books Collection
The charts shown in this post were taken on the 30th September 2016, and the analysis was conducted based on the price action up to the 30th September.
Disclaimer: This post was for educational purposes only, and all the information contained within this post is not to be considered as advice or a recommendation of any kind. If you require advice or assistance please seek a licensed professional who can provide these services.
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I am a private trader and equities investor that loves the trading and investing world, following the markets and everything in between.