How long have you held the stock?
Since mid-2011, when the stock traded towards $20. The global macro shocks coming out from Europe and the global banking sector at the time, created some excessive market volatility that, while not as bad as the GFC, was, never the less, a volatile time for the global and domestic banking sector.
What do you like about it?
Macquarie is a very well run, diversified financial institution that has proven itself through different economic cycles. It has reinvented itself successfully since the GFC, due to a global change in the price of funding. Ultimately, it is a good diversified financial exposure with leverage to improving global conditions, particularly Asia and the US. It is well placed to benefit in the years ahead with a more normalised IPO pipeline. The equity cash business (and research) is a stand out, it has a wonderful global commodities business and its funds management capability is world best practice that continues to benefit from positive fund inflows across all asset classes. It has contained costs very well, following an aggressive adjustment to staff levels but is now well placed to expand their earnings in the year ahead. Its private wealth management capabilities may be lagging others globally but it has proven in the past that it can deliver and execute a growth strategy. Further, its funding costs have fallen significantly and the strong management capability is crucial.
How is it better than its competitors?
It is the only true global diversified financial in the ASX200. Good strong domestic presence and the ability to expand global earnings. The Equity Capital Markets/ Debt Capital Markets team is very competitive. Senior management is well regarded in executing strategies.
Source: Yahoo Finance
What do you like about its management?
Senior management has changed the model post the GFC but has still created a business that can return good EPS growth going forward with cost controls. Those in senior management are adaptive, but understand the long game and changes required in global markets.
Is it a liquid stock?
Yes. Liquid for both large global and domestic investors.
What is your target price on Macquarie?
Around AUD $65 by mid 2015.
At what point would you sell it?
That would be a global slowdown scenario when central banks need to tighten monetary policy to slow down capital market activity. We are a long way from that.
How much has it added to your overall portfolio over the last 12 months?
It has been a significant contributor to the Equity Trustee Core Flagship Equity Fund. It has been our largest diversified financial overweight. The stock has rallied from mid $30 levels to current $53 levels over the past year.
Important: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Consider the appropriateness of the information in regards to your circumstances.
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