MFG in the BUY zone, page-369

This is the interesting conversation investors should be having. Many variables comes into play here, when you start talking economics. You may have heard the joke about economist which goes something like this, “on one hand this can happen, on the other hand this can happen.” No definite answer.

This is where Magellan funds will out perform the market. Yes, some of the high PE stocks may get affected for little while, they will readjust quickly to the new normal interest environment. I say this because the tech stocks in the MFG are the best of the best in my opinion for the future. They have the best Balance sheets with cash to burn, the markets and services they are providing are still growing and may be for next 8 years. For example cloud computing market has a long way to go apparently and it will benefit MSFT, Amazon,Google. Another example is as a result of Covid, our work and living methods will changed for ever. So the internet service providers like Google, Facebook, MSFT,Amazon will benefit still. If you look at some of the 3 to 5 future estimate analysts have for these companies are mind blowing. If you look that far FB, Google are in a PE of less than 20. The other consumer retail like business in the portfolio has done better than other industries in a down turn for last 100 years. In a down turn I don’t think anybody is going to say Mcd,PEP,Yummy, Nestle will be out performed by other industries, commodities and banks etc. Also remember the entire world is full of debt, central banks don’t have increase interest by much to slow the economy and asset prices. Emerging markets will be very vulnerable due to debt levels. My bet is MFG will collect some performance fees too as the criteria is that they have to do better than others in down market, which Hamish is very fond of saying.