MFG in the BUY zone, page-881

Hi @Plague

Here is the full list of Magellan holdings with similar timeframe to above:

It is a bit lower based on same time period.

Thought I would do the same with the Global Infrastructure Equity Fund:


As you mentioned it is too difficult to pull out GQG holdings, they are all available in the end of quarter reports, but their holdings are diverse and the format of the report does not allow to copy and paste easily into excel (would need Intelligent Character Recognition Software to extract details out).

Don't get me wrong about Magellan, I believe the business is solid at the moment and there is only a small % of FUM flowing out (outflow accelerated in the September Quarter, here is a table showing FUM outflow for retail and institutions:

I am sure this will stabilise, but this is the risk factor I would be watching if I was invested in Magellan. Platinum started with a trickle and is currently hemorrhaging FUM, despite good performance. So once the Outflow starts it is hard to get the confidence back of investors unless action is taken to improve fund performance (which Platinum did), but also consider the cost of FUM (which Platinum did, but stuffed up performance after the lowering of fees).

While the outflow and performance isn't great, Industry Super Funds have done research into Australian investors and have found that 20% actively manage their superannuation accounts - 80% of Australians do not monitor the performance of their superannuation. Most Industry Funds have embarked on programs to improve long term returns for members by defaulting under 55's into a High Growth option.

I just wonder if this corelates into Managed Funds and how active investors are with their money. Looking at Magellan and the outflow, it seems to be pretty similar which is good news for the Magellan Fund Management business.

In terms of the share price vs fair value, assuming the current outflow and performance stays constant, the business should be valued at a lower multiple compared to higher performing peers. Magellan will grow over time, but not as quickly as it once did. If you assume in the above graphs it is based on Magellan earnings per share of $2.75 and GQG of 11.5c, then Magellan's PE Ratio is 22.5 and GQG's is 24.8. Is this a fair price variation for GQG given that its underlying business is growing at twice the pace of Magellan's? I believe Magellan's PE Ratio should at most be at 15 times, but needs to be monitored due to performance (yes I know, this is $41 based on next years earnings). No one should pay more than 15 times earnings for a business that isn't growing (which is what is happening in Magellan's underlying business). At a PE Ratio of 15 times, this is a 27% increase on today's share price. The question is, is there a better return out there - GQG based on the above is a 58.6% increase on today's share price.

In terms of GQG's share price, the FUM performance numbers need to be monitored, but I think quarterly numbers are more important than month to month. I have seen FUM in this business grow significantly over the years and as you mentioned it is still in that growth phase, but trees don't grow to the moon. Believe it has another 2 to 3 years of good growth and I am hoping this is reflected in its share price over time, but the FUM numbers are key, just as they are with Magellan.

I think the other point to make is that Magellan can turn the business around. As an example, Platinum have done a fantastic job in turning performance around in the last year or so. The Health and Brands Funds have performed exceptionally well recently. Magellan should look more into how Platinum have achieved this and may surprise on the upside in the next year or two, but there is no indication that they are doing this yet (small sell down of Alphabet in portfolio is not much change). The old strategy of FANG stocks, with a bit of China on the side is no longer a good strategy and needs to be drastically changed. It will be interesting to see the changes of holdings in the next quarterly release after December.

Best of Luck
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