Ann: Update on Hamish Douglass & David George commencement date, page-103

because in this current market cycle your logic is totally correct, but market cycles evolve. There were many years when Magellan Funds were outperforming, which enabled them to ramp their marketing and massively increase FUM.

Currently the market cycle (and MFG own investment decisions to deploy fund allocation both on a totality and individual stock basis) is significantly dragging their equity performance. Hence all the panic.

But this is also being reflected in the share price, the share price represents the price paid for a unit of value of the business.

What is the unit of value? Simplistically the future cash flow +NTA (given that NTA is financial dollars).

So right now we can be reasonably confident of the following:
$5 NTA, $0.8 final FY22 dividend and $1.20 FY23 dividend. In total that equals $7.

So at $12, I have a reasonable level of confidence of:
*a) Having $5 as a store of value that will grow over time as reflected by the investment markets.
b) $2 of dividends in the next 18 months.

This totals $7.

That leaves $5 of "business risk".

So my question is: How capable is MFG returning an additional $5 of dividends going out into the future not including the next 18 months?

You can do the same analysis at a share price of $10.

But for some they will see where I am coming from. And all of this doesn't include any share price appreciation.

Then the is the catch22, we are all looking at downside. What if MFG actually start to out perform next year???
We don't know the future, but if MFG funds start to out perform, then the share price will really rocket to the moon from current share price levels.
This is my potential upside.


So I look in totality at my upside potential, but more importantly my downside risk, and then invest accordingly (whilst keeping a limit on each individual share allocation in case I am wrong, hence the importance of always running a diversified portfolio).