Consensus community valuation
$54.05
Average Intrinsic Value
11.4%
Overvalued by
Active Member Straws
#MFGIntrinsicValue
Added a month ago

This is my own analysis for MFG. Please note that this is my first attempt at writing my own report and I dont expect it to be perfect but you have to start somewhere. Would love any feedback and thoughts.  

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#Monthly FUM
Last edited 2 months ago

06-May-2020:  Magellan Funds Under Management - April 2020

Magellan Financial Group (MFG) are the manager of both the listed and unlisted Magellan funds in Australia, including the two LITs (listed investment trusts) MGG & MHH.  MFF Capital Investments (MFF) however is managed by Magellan's co-founder Chris Mackay, who works in the same building as Hamish Douglass and the Magellan team, but does his own thing with that one fund.  Chris holds more retailers and US Banks than Hamish does, Chris is more old-school.  Hamish is more new tech, global megathemes like the shift to cloud computing, big data, global digital platforms and global digital payment systems. 

Hamish Douglass, co-founder of Magellan and the CIO of all of the Magellan funds here in Australia (except for MFF which is not actually a Magellan fund any more) holds all of the FAANG stocks except for Amazon.  While he believes Amazon is one of the five best companies in the world, Hamish can't justify paying the asking price for Amazon shares.  He doesn't hold them purely on valuation grounds.  It's instructive I think to look at Magellan's FUM over the past few months to see how Australia's largest global funds manager (who usually manages over $100 billion) has done in terms of performance, inflows and outflows.  It should be noted that MGG and MHH are both closed-end funds, so there are no inflows and outflows (unless they pay distributions, have an operating distribution reinvestment plan, or raise new capital and issue new units as a result of those raisings).  The inflows and outflows relate to Magellan's open-ended funds, their more traditional managed investment funds.

  • MFG's FUM (funds under management) at Jan 31 was $104,311m ($104.3 billion).
  • Feb 29, FUM = $100,650m, so they lost $4.114m ($4.1 b), offset by $453m of net inflows, including $60m of net retail inflows.
  • Mar 31, FUM = $93,991m, so they lost $7,128m ($7.1 b), offset by $469m of net inflows which consisted of $772m of institutional inflows and $303m of retail OUTflows.
  • Apr 30, FUM = $96,973m, so they gained $2,164m ($2.2 b), which includes $818m of net inflows, with $175m of that being from retail investors.

Summary: 

They have had net inflows every month, and retail net inflows every month except March, although they still had net inflows in March because of the institutional inflows being greater than the retail outflows.  It's a testament to their strength and standing that they have NOT suffered net outflows from their open-ended funds in any month this year.

The greatest drawdown in terms of FUM was in March obviously, and it was all due to the value of their investments falling.  From the end of January to the end of March, their FUM dropped by less than 10% - it was down -9.9% from $104.3 billion to $94 billion, however, it rose +3.2% in April, leaving their April 30 FUM only -7% below their January 31 FUM.  No doubt their continuing net inflows every month have assisted with that performance, however I also think that their portfolio repositioning as well as the strength of their underlying core holdings has a lot to do with it.

A lot of the work they did in March was explained here:  02-Apr-2020: Magellan Global Markets and Portfolio Positioning Updates

 

Disclosure:  I hold MGG and I also hold some MHH for my kids.  I don't currently hold MFG, as holding the manager as opposed to the funds they manage is a different proposition - as returns from holding the manager will depend quite a bit on the level of performance fees they can generate.  However I have held MFG in the past, and it has been a profitable investment - I just bailed too early because I thought they looked overvalued.  They went on a LONG way further north after I sold out however.  Looking at the relative values now, I still prefer MHH (they haven't bounced back up as far yet), followed by MGG, followed by the manager, MFG.  However, they are different.  MHH is a more concentrated version of MGG (MHH hold less companies in their portfolio), and MGG have a higher distribution yield target than MHH.  MFG is of course not a fund but a fund manager, so a different investment entirely.  They all look reasonable, but best bought on further market weakness.  So - if we get another decent pullback, I'll probably be loading up on one or more of MHH, MGG or MFG (the manager of the other two).

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#Hamish Douglass on COVID-19
Last edited 4 months ago

11-Mar-2020:  Firstlinks: Douglass on coronavirus: 'Expect volatility but don't panic'

"Expect volatility but don't panic, would be my view, because before 12 months, I think we'll be looking back, and this event will have passed."

This is the view Magellan's Hamish Douglass delivered to the thousands of investors who packed Sydney's International Convention Centre on Friday night [06-Mar-2020] to hear his latest update.

With fears about the coronavirus pushing stocks closer to a bear market, Douglass adopted a relaxed tone, telling investors to sit tight and take a long-term view. He told the crowd of advisers, industry professionals, retail investors and students.

"Our best view is that this may be six times as serious as the seasonal flu.

"While [the virus] is going to affect a lot more people, I think the spread may well be less because of the extreme containment measures. But with the extreme containment measures is going to come a pretty sharp economic impact around the world, which will realistically be three to six months.

"During that period, I would expect a lot of share price volatility as people react to the headlines. I think if we look a little bit longer out, this flu or pandemic or whatever you want to describe it will have its consequences. But the economic effect is likely to pass very quickly."

Douglass avoided discussing the virus for much of the presentation, devoting his time on stage to how interest rates will affect equity valuations and the rise of the Chinese consumer.

But talk of the virus, which dominated headlines for the days leading up to the event, infected audience question time.

[...Click on link above for more...]

Also includes the Magellan Global Fund Portfolio Top 10 Holdings, as at 31/12/2019. 

Hamish is very keen to have exposure to cloud computing and the global data storage giants who dominate that space.  Magellan isn't invested in Amazon (on valuation grounds only, other than that Hamish loves the business) but the other three main players in that space are Microsoft, Alibaba and Google (Alphabet), which are all core holdings across the various Magellan funds, including MHH & MGG.  Tencent are the second largest player (in cloud) in China, and growing fast, and Magellan have recently taken a substantial position in Tencent also.  Hamish likes playing global megatrends, and the shift to the cloud is certainly one of those.

Another theme he loves is global payment systems, and the most obvious two are Visa and Mastercard (both are Magellan holdings), but not so much in China - as explained here:  https://www.bloomberg.com/graphics/2018-payment-systems-china-usa/

In China, the payment systems are dominated by Alipay (owned by Alibaba) and WeChat Pay (owned by Tencent), and Alibaba and Tencent are also now core Magellan holdings.  Incidentally, those two companies also happen to be the largest two positions in Platinum's Asia Investments LIC (ASX: PAI).  If you look at those sort of companies - fast growing with massive tailwinds, you can see why it's not too hard for Hamish to take a longer term view of the market and see through this volatility to a time when things once again normalise and those companies continue to grow at a very good clip.  I think he's quite brave to put some numbers around how long that will take, and he could well be wrong about those predictions (underestimating the effects and the time it will take) - but his message is spot on regardless, which is that - this too will pass.  

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#Communication from Management
Added 16 hours ago

14-7-2020:  https://2020.magellaninreview.com.au/

And for their individual fund reviews:  https://2020.magellaninreview.com.au/#fundReviews

MFG is of course the manager, not a fund, and I don't currently hold MFG shares (wish I did!!), but I do hold shares in some of their listed funds, such as MGG & MHH (which MFG manage).

They sent me an email this afternoon that started off with:

"The past six months have been truly extraordinary, unlike any other global crisis that people have seen in their careers. More than 13 million people have now been infected as covid-19 has spread around the world. The human cost of the virus is sobering and so too is the economic damage. Authorities globally have responded with unprecedented stimulus that arrested markets from their March lows. As the end of the financial year passes, we’ve taken stock of the past 6 to 12 months and share with you our most up-to-date investment thinking in ‘Magellan's InReview 2020, our annual investor communication published in July each year.

"Magellan's InReview 2020 has a collection of deeply thought-provoking investment perspectives from across the Magellan investment teams. It includes a keynote article by Hamish Douglass - 'Knowing what you don’t know’, a recent video in which Janet Yellen, the former Chair of the US Federal Reserve, and adviser to Magellan, talks to Hamish Douglass about the outlook for the global economy, as well as articles from Airlie Funds Management’s Matt Williams and Magellan’s Global Listed Infrastructure Head, Gerald Stack."

"Annual Fund Reports and Quarterly Fund Factsheets for our range of global equities, global listed infrastructure and Australian equities portfolios, can also be found in Magellan’s InReview 2020 site."

The second link at the top of this straw (2nd from the top) can be used to access their reviews of the various funds that they manage.

Magellan (MFG) are the most respected global fund managers that Australia has ever produced I believe, and certainly one of the most successful, having easily surpassed Kerr Neilson and his team at Platinum Asset Management.  Platinum specialise in Asia, particularly China.  Magellan do own Chinese stocks, like Tencent and Alibaba, but most of Magellan's biggest winners are listed in the USA.  MFG itself (the manager) has been a brilliant stock to own, but I always end up selling out way too early...

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#Broker / Analyst Views
Added 2 months ago

08-May-2020:  As far as brokers and analysts go, everybody has huge respect for Hamish and what he has achieved with Magellan, as well as his vision, his strategy, and the way he communicates and promotes the company.  Their issues are always around valuations and what the best ways to play the theme are, i.e. via the manager (MFG), through the listed funds (MGG, MHH), or via his unlisted open-ended funds.  All have slightly different fee structures and distribution yield targets.  

In his midday (lunch time) email today, Marcus Padley said this:

The importance of Technology investments – Overnight Paypal hits a record high up 14% on results, the NASDAQ is now up for the year, Viacom was up 10% on results overnight, Uber was up 11% on results overnight, Atlassian hits a record high. And you’re still wondering whether to buy NAB for a dividend or whether WES or WOW is the better stock. As I wrote in the newsletter this week - a growth investor has to have a meaningful exposure to Technology long term. Companies with global reach are the focus. Tencent taking a stake in APT confirms its global relevance. We don’t have the technology behemoths that the US has but we do have some exposures and they are now all neatly corralled for us in the ASX ALL TECH sector (which now has its own ETF). We should all keep a list of the Australian technology stocks on our desk long term. The right technology businesses have the opportunity to grow their businesses globally and exponentially. It makes investing in Woolworths and Coles look so pedestrian. As a growth investor you have to embrace that. The fact that many of these companies are not ‘index relevant’ in Australia is good. They are not on all institutional radars. But when Afterpay is the biggest company in Australia…the big funds and the traditional buy & hold investors will wake up. And if you think that’s a stupid comment let me point out, Atlassian if it was listed here would be the 5th biggest company in Australia with a market cap bigger than WBC, NAB, ANZ, WOW and WES, and Paypal would be the biggest company in Australia worth 60% more than either BHP and CSL.

--- I'm back - Plenty of food for thought there.  Marcus is plugging ASX-listed tech stocks there - like the WAAAX stocks (WiseTech, Afterpay, Altium, Appen & Xero), but I think it also highlights that we don't have many companies that compare favourably with the massive global digital platform companies and the global cloud-computing and data-storage giants that are listed in the USA and a couple also in China (Tencent and Alibaba).  With the exception of Amazon (which Hamish has not bought based purely on valuation grounds) you can get access to most of those via a Magellan fund because Hamish plays those themes.  You could also buy the Betashares NASDAQ top-100 ETF, NDQ, but I would be willing to make a small wager that MGG or MHH will outperform NDQ over most reasonable time periods.  Hamish does add value with his stock selection as well as his buy/sell timing.  

[Disclosure:  I currently hold MGG and I have bought MGG & MHH for my kids.  I don't currently hold MFG or any of the WAAAX stocks.]

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#Media
Added 2 months ago
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#Magellan vs Platinum
Last edited 4 months ago

"We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten." - Bill Gates

Magellan vs Platinum,   or   Hamish Douglas vs Andrew Clifford: 

17-Sep-19 - The two CIOs of our two most prominent ASX-listed global funds management businesses (MFG & PTM) have been doing a few odd joint interviews over the past year or two, and this one is a good one.  In this "Livewire Live 2019" piece, Patrick Poke from Livewire Markets reviews the latest joint interview between those two CIOs whose views are often very, very different (but who both own Ali Baba, the "Amazon of China"; in fact, Magellan are a top-10 shareholder of Ali Baba).

https://www.livewiremarkets.com/wires/magellan-and-platinum-10-years-from-now-this-is-how-the-investing-world-has-changed

If you want to skip to the video - click here:  https://youtu.be/7Mp2gctWb6k

I always think that Hamish Douglass comes off looking and sounding far better than Andrew Clifford does whenever they go head to head, but good on Andrew for having a go once more.  It is interesting how they have similar ideas or viewpoints on some things, such as the opportunity that exists in the rise of the Chinese consumer (& associated consumer expenditure in China) but how they tend to approach participation in that theme in completely different ways (- for the most part, except for Ali Baba clearly, which they both hold).  Anyway, I strongly recommend watching this video. 

Magellan has two key consultants on the topic of interest rates; Kevin Warsh, a former Federal Reserve member who may serve as the next President of the Fed, and none other than Janet Yellen herself, the previous President of the Fed.  Hamish says their advice played a role in him adjusting his views on rates. He now sees three percent as a base case for long term rates, but says that scenarios between zero and two percent shouldn't be ruled out.  These sort of insights have implications for the Australian market as well of course. 

Andrew's view is that negative interest rates are unsustainable and could destroy the banking sector in some countries, so he believes that central banks have done about as much as they can and we're going to get fiscal stimulus in a range of countries and regions and that could lead to increased demand for materials and that in turn could lead to inflation which would support higher rates.

Hamish says that, above all, locking yourself into one view and one position is dangerous and you have to be ready to adapt quickly, because while it's good to have a view (and they have a view) on what is most likely to happen, you have to keep in mind that a range of other eventualities is entirely possible.  He also said that while he has the best advisers, his team doesn't always agree with them either.  So, have a view based on good, sound reasoning, and position accordingly, but don't be locked in to that position - be ready to adapt - and fast, because things can and do change, and sometimes very rapidly.  Very good reading/viewing!

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#Hamish's New Fight Plan
Last edited 6 months ago
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#Monthly FUM
Added a month ago
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#MFG Launches AASF Active ETF
Added a month ago

04-June-2020:  Launch of Airlie Australian Share Fund (Active ETF)

MAGELLAN FINANCIAL GROUP LIMITED

Launch of Airlie Australian Share Fund using next generation of Active ETFs

  • Magellan launches the next generation of Active ETFs, bringing together the features of an unlisted fund and Active ETF into a single unit in a single fund
  • Provides investors with greater choice and flexibility in how they invest and will deliver efficiencies to fund managers

Magellan Financial Group Limited (“Magellan”, ASX: MFG) is pleased to announce that the Airlie Australian Share Fund (Ticker: AASF) will commence trading on the ASX today. 
 
Brett Cairns, Magellan’s CEO, said today: “The launch of Airlie Australian Share Fund on the ASX represents an important evolution of Active ETFs in Australia.  This simplification eliminates the need to have two separate funds, one for investors who prefer using unlisted funds and another for those who prefer funds quoted on a stock exchange. Instead, investors, advisers and brokers will now be able to invest in a single, open-ended fund using the access point they prefer.” 
 
“Magellan has always focussed on simplifying the investment process for our investors and reducing unnecessary frictions and costs. We intend to use these next generation open-ended funds to deliver effective investor solutions in the future.” 

 
Matt Williams, portfolio manager for the Airlie Australian Share Fund, said: “The Airlie Australian Share Fund is a product of the partnership between Magellan and Airlie Funds Management. Airlie’s approach to investing has been developed over 25 years and employs a conservative and robust process that weighs the financial strength, business quality, quality of management and valuation of each company. We are excited to make Airlie’s investing expertise accessible to investors through the ASX.” 
 
The Airlie Australian Share Fund (Ticker: AASF) is the fourth Active ETF launched by Magellan and has outperformed the Australian market by 6.6% net of fees over the 12 months to 31 May 2020. 
 
With around A$2.5 billion in funds under management and over 35,000 unitholders, Magellan’s Active ETFs have been widely adopted by investors who benefit from:

  • The ability to buy and sell units on the stock market and settle via CHESS;
  • Access to real time and transparent market pricing;
  • Active portfolio management;
  • Efficient pricing due to the open-ended nature of the Fund; and
  • A high level of liquidity with the Fund providing liquidity to investors.  

 

Note:

(1) The Airlie Australian Share Fund has returned 2.7% p.a. since inception on 1 June 2018, outperforming the Australian market by 0.9% p.a. over that period.  Past performance is not necessarily indicative of future performance. 

--- click on link above for more ---

Further Reading:  AFR (04-June-2020): Magellan hails new era for active ETFs with Airlie launch

https://www.raskmedia.com.au/2020/06/04/magellan-asxmfg-announces-new-etf-and-may-fum/

 

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#Strategy & Portfolio Update
Last edited 3 months ago
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#Hamish Douglass on COVID-19
Added 3 months ago
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