MFG relative under-performance vis a vis MSCI will take time to...

MFG relative under-performance vis a vis MSCI will take time to run off.

I am resisting any short term data which is merely noise IMO. The real game here is:-

1. How the business immediately restructures its operations/staffing as a result of the loss of its largest mandate
2.The conviction of the investment team to hold their positions and not chase returns
3. Whether the defensive positioning strategy proves to be correct or not over the next 12 -18 months
4. Ongoing retention of institutional mandates and retail FUM
5. The performance of the non investment related businesses over the next 12 -18 months

None of the above issues is assured to go in favour of MFG, and each of them really needs at least 12 months to determine their business impact.

I am building an increasingly overweight position, over time, taking the view that wins will exceed losses over the next 3 years.

I expect the day the dividend is cut savagely, as it should be, will see blood in the street as retail holders fixated on income will be disappointed. Like many, my investment in MFG is predicated on business strength and recovery potential from its profit centres.

Dividends are merely the by-product of business success. If they come they come, but it may take some re-investment and restructuring between now and then. It will be up to management to successfully articulate to the market the plan going forward and the short term investment required. Just as they would demand from the wounded target seeking investment from their investment team.

Shoe on the other foot is the challenge for both MFG and PTM. Though they are very different beasts, they both are suffering from similar relative performance ills.

I have no fear the passive ETF industry that has thrived on low-cost, momentum driven risk performance will suffer a similar fate as markets roll over. QT, stimulus withdrawal, the threat of rising interest rates, inflation concerns, supply chain costs, increased wages costs and lofty prices of key heavyweight tech stocks in most indices all point to only possible outcome. It may take 3 months, 9 months or 18 months but when markets roll over, passive investments will prove to be the worst place to have invested.

We will all lose money, but investment success will be judged by the sectors and styles that lose the least.

For myself (only) I happily hold overweight positions in cash. If it were not so, I could never really have invested so aggressively in the throng of unloved stocks now scattered throughout markets. I don't care what the performance of an index in any year is or is not, my portfolio is designed to be invested in companies positioned for future conditions. It is of no consequence that a private portfolio can significantly outperform public funds, but usually accompanying that outperformance is years of pain.

Adopting an absolute return model, MFG rode a decade long wave of excited investor support - until they failed to deliver in extremely unpredictable market conditions. Having misread the direction of the wind, for the first time in 14 years, they have been abandoned by those very same investors. They have been judged on the last 18 months, just as Berkshire Hathaway has in earlier times. I am glad I do not subject myself to such unforgiving treatment in such a short space of time in such uncertain investment times.

Precious metals, REE, nickel, cobalt, uranium and even simple mortgage broking businesses were once dogs of investments. This gave patient, non income seeking investors years of time to gradually accumulate, if they could get over the financial and emotional hurt of underperforming general indices. Over the last 3 years each in turn has produced 3x -10x returns. Like child birth, the final and extreme bout of pain is very quickly forgotten.

Many posters here know exactly what it is likely to be an "over night guru" after having owned a stock/asset for 10 years or more. Recency bias is an incredible thing.

I believe MFG and its staff will either make itself a much stronger business as a result of the market recent shellacking, or it will break up and be a fallen angel. There will be no middle ground here. The model is either broken or needs remediation. I do not believe it is broken at all.

I do not need income so the dividend is not an important attraction to me, as it may be to others. Absolute returns has been my yardstick for over 40 years and it has always served me, whilst dealing many humbling lessons along the way. I am prepared for whatever come from MFG, leaving myself open to re-appraise my thesis, if business circumstances significantly. I will walk away with a loss if I no longer believe in the approach being taken. However, if the approach is sound and only the timing is out, you can bet your bottom dollar I will be buying at $15.

This is my approach only, meeting my preferences and circumstances. It is not financial advice. DYOR

GLTASH