Stock Update

Magellan Financial Ltd (ASX:MFG)

13 Feb 2020
Magellan Financial Group Ltd operates as an investment management company. The Company invests in global equities and listed infrastructure. Magellan Financial Group serves customers worldwide.

MFG, a January addition (for the second time) to the Momentum Strategy, reported its interim profit numbers today and the update has been enough to ensure the stock has continued its recent rally. The stock is now trading at around $74.00 which is up roughly 18.5% from our entry a month ago, and the momentum within the business is very impressive. Continually winning new institutional investment mandates, MFG now manages over $100bn in funds and that is growing even more rapidly with the bull market ballooning the existing funds under management.

MFG’s average funds under management (FUM) stood at $92.8bn throughout the first half – up 29% on the previous corresponding period (pcp) – and management fee revenue was $285.9m. The stock now has a market capitalisation of over $13bn, so the company trades on almost 24 times its management fee revenues which is easily the richest valuation in the sector. It does earn significant performance fees as well, but these are more seasonal, and the jewel in the crown are the recurring management fee revenues. Realistically, while MFG’s investment performance continues to impress it’s hard to see the company’s FUM growth slowing anytime soon, so a bull market helps MFG on multiple levels.

MFG is a hold within the Momentum Strategy, which ultimately means we will exit the stock once the tide starts to turn against the stock. Given the strength of the market at the moment, it’s hard to see us exiting the stock in the short-term so we continue to expect higher levels.

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