The Aberdeen Standard Physical Platinum Shares ETF (PPLT) is an Exchange-Traded Fund designed to give investors direct exposure to the price movements of platinum. Think of it as a simple, stock-market-friendly way to own the precious metal without the headache of finding a secure vault to store heavy platinum bars. This fund is what’s known as a “physically-backed” ETF, which means it doesn't just track platinum prices using derivatives or futures contracts; it actually holds physical platinum bullion in secure vaults (primarily in London and Zurich). When you buy a share of PPLT, you are buying a fractional, undivided interest in the platinum held by the trust. The goal is straightforward: to have the share price reflect the price of platinum, minus the fund's annual Expense Ratio. It offers a liquid and convenient alternative for investors looking to add a “hard” asset to their portfolio.
At its core, PPLT operates as a trust that buys and holds large bars of physical platinum. The trust then issues shares, with each share representing a claim on a small fraction of that platinum. For instance, one share of PPLT might represent roughly one-tenth of an ounce of platinum. The value of the fund's shares is intended to track the Net Asset Value (NAV) of the platinum it holds. The NAV is calculated daily based on the London Bullion Market Association (LBMA) Platinum Price. Because PPLT trades on the stock exchange like any other stock, its market price can sometimes trade at a slight premium or discount to its NAV due to supply and demand dynamics throughout the trading day. However, a mechanism involving large, authorized participants creating and redeeming large blocks of shares generally keeps the market price very close to the NAV. Investors should always be mindful of the fund's expense ratio, which is an annual fee deducted from the fund's assets to cover operating costs, slightly reducing the overall return compared to the spot price of platinum.
So, why would a value investor, who typically hunts for cash-generating businesses, even look at something like PPLT? The answer lies in the unique role that Hard Assets can play in a portfolio.
Unlike stocks or bonds, which are financial claims, physical platinum is a tangible asset with inherent scarcity. This gives it a few potential advantages:
A value investor always asks: “Is it cheap?” With a commodity, “cheap” is relative. One popular metric is the Platinum-to-Gold Ratio. Historically, platinum has often traded at a higher price than gold due to its rarity and industrial importance. When platinum trades at a significant discount to gold, some investors see this as a signal that it may be undervalued and poised for a comeback. However, a critical distinction must be made. Classic Value Investing, as taught by pioneers like Benjamin Graham and championed by Warren Buffett, focuses on buying productive assets—businesses that generate earnings and cash flow. Platinum produces nothing. It just sits there. An investment in PPLT is not based on a company's ability to create value, but on the speculation that someone in the future will pay more for the metal than you did.
Before jumping into PPLT, it's crucial to understand the potential downsides.