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I bought these three stocks a year or so ago in response to what seemed to be a general view (at that time) in favour of stocks with overseas activities: Magellan Finance, Platinum Asset Management and Macquarie Group.
As of market close today, Friday, 4 March, I am 23% up on MFG,11% up on PTM and 11% down on MQG, after considerable gyrations in all three in recent weeks.
Am inclined to regard MFG and PTM as longer term investments, but wonder about MQG.
I would greatly appreciate your views.
A: Thanks for the question.
Platinum (PTM) and Magellan (MFG) have two main drivers of revenue growth – net funds flow, and potentially, performance fees. They also benefit if the AUD weakens. In regards to performance fees, if equity markets get the wobbles, then performance fees evaporate and the share price gets hit. This is what we have seen over the last two months.
Macquarie is a far more complex institution. While it has been hit because of the equity market wobbles (reduced investment and corporate banking opportunities, funds management performance fees), I think it looks in pretty good shape. It may have been a little bit overbought last year (it started 2015 around $58), and so some of the pullback was possibly overdue. I would be inclined to hang on. As for the brokers, they are mildly positive on the stock (sentiment rating of +0.4, where -1.0 is most negative, +1.0 is most positive), with a consensus target price of $75.90.
An important point to note with all these stocks is that they will typically be more volatile than the market, and are somewhat dependent on the health of global equity markets. While they will benefit from a weaker AUD, they are probably more exposed to the state of the equity markets than the currency. You may want to consider this in your portfolio allocation.
