Plato Investment Management’s ‘red flag’ system has proven highly successful in identifying companies likely to underperform, leading to profitable short positions. Chanel Stuart-Findlay, a senior portfolio manager at Plato, uses a checklist of 150 red flags covering governance, accounting, management behaviour, and financial strength to assess potential investments. Plato Investment Management is a fund manager that utilises a systematic approach to identify investment opportunities and manage risk. The firm’s Global Alpha fund, now worth $1.1 billion, has benefited significantly from this strategy.
One notable success was shorting Liontown Resources after observing warning signs such as the CEO selling shares. Plato identified quality issues at one of Liontown’s mines before they became public, profiting from the subsequent 25 per cent stock drop. Similarly, the fund shorted Mineral Resources after concerns arose regarding the company’s auditor and the use of company resources by its founder. Another successful short position was taken against Star Entertainment, flagged for financial distress.
Currently, Plato’s short bets include uranium miner Boss Energy, where concerns about quality problems at its Honeymoon project proved accurate. The Global Alpha fund has achieved a 17 per cent return this year, significantly outperforming the MSCI World benchmark’s 6.6 per cent return. Since its inception in 2021, the fund has delivered an annualised return of 24.67 per cent after fees.
While the fund has many short positions, Plato maintains a 150:50 strategy, holding three times as many long positions. The fund is bullish on the industrial sector, especially defence stocks, citing increased military spending amid global instability. Rolls-Royce is a top long position, buoyed by its defence business. Plato also focuses on software companies providing AI-enabled services, such as Salesforce, Adobe, and Intuit, and has recently invested in Ryanair, anticipating market share gains.
