Magellan manages global equities and global listed infrastructure strategies.
Magellan operate six global investment funds in total. They have two Global Funds (one is hedged); two Infrastructure Funds (again one is hedged) a High Conviction Fund and the Magellan Flagship Fund which is also listed on the ASX under the code MFF.
What is there to like about Magellan’s business?
1. Magellan enjoys a significant tailwind with a strong pipeline of inflows adding new funds under management each month. Magellan began in 2008 with a few billion under management. Today, the company manages about $23 billion and has the capacity and a pipeline of distribution channels virtually guaranteeing new fund inflows each month. Magellan present that they expect to be managing in the vicinity of $70 billion by the year 2018.
2. This growth in funds under management creates the potential for significant revenue and net profit growth for many years to come.
3. Magellan invests in arguably some of the best performing businesses around the globe. In a way, Magellan’s shareholders receive the benefit of the performance of those global businesses via an Australian domiciled company. Some of Magellan’s large international holdings as of June 2014 include:
- Microsoft (USA)
- eBay (USA)
- Tesco (UK)
- Nestle (Switzerland)
- Visa (USA)
- Oracle (USA)
What are the risks facing this business?
One risk is the ability of the company to produce significant returns on investment particularly if / when global equity markets fall for a significant period of time.
Is it run by able and trustworthy management?
Magellan’s CEO and Portfolio Manager is Hamish Douglass. I form my investment views from a wide range of sources. There are a number of people both here in Australia and internationally that I am happy to read everything they write and even happier to watch every video presentation they make. Mr Douglass is one of those people.
Is it trading at a bargain price?
Magellan on my valuations is not trading at a bargain price. However, with the tailwinds behind this business, its performance to date and the intelligence of the manager, it would be a pleasant surprise if this business was trading at a cheap price.
|Company||Code||Rank||2014 Actual Valuation||Today’s Share Price||Margin of Safety||2015 Forecast Valuation||2016 Forecast Valuation|
|Magellan Financial Group Limited||MFG||Gold 1||$8.95||$13.37||-46%||$9.15||$10.02|
*Valuations subject to change on a daily/weekly basis
In summary, Magellan is an excellent business run by a very intelligent manager. Magellan has a long run way ahead courtesy of a large pipeline of new funds under management flowing into the business. In a way, Magellan is a proxy for receiving international investment performance from some excellent global businesses without having to research abroad.
This article is published by Dean Mico.
Disclosure: The Edge Fund owns shares in Magellan Financial Group Limited.
The information provided in this article is intended for general use only. The article is intended to provide educational information only. Please be aware that investing involves the risk of capital loss. The information presented does not take into account the investment objectives, financial situation and advisory needs of any particular person, nor does the information provided constitute investment advice. Under no circumstances should investments be based solely on the information herein.