Mark Moreland |Teaminvest Co-Founder| ausbiz The Call 12Apr2022: Magellan Financial Group Ltd.(MFG)

Has Magellan hit rock bottom? Teaminvest co-founder, Mark Moreland, shares his views on whether it is time to buy or say goodbye to one of the country's most profitable businesses. #MFG #Magellan #thecall #ausbiz #asx #buyorsell #teaminvest #stockmarket #fallingknife @ausbiz Tony wants a view on the market's falling knife, and I must admit I've cut my palm on it as well, on Magellan, a funds management group. Mark, Tony is saying a slight lift off the bottom in Magellan's share price. Is this the start of a turnaround? Well, I hope so. I mean, you could say "I hope" is not a strategy, but I hope so. Because I bought some too. And I owned Magellan before, and I bought them years ago when they were about 18. So, I'm arguably slightly in the red, but I'm not really because they've paid really good dividends all the way through. And people tend to forget to add those back on, when you look at your returns rather than just looking at the share price over time. Having said that, the reason why it's coming back up a bit, I think is just the reaction of being oversold. It was a perfect storm for Magellan. Everything that could go wrong went wrong. First of all, the political situation in China pushed Alibaba and freaked out the West that maybe they could lose their money investing in Chinese tech stocks, and Magellan had significant holdings in that, and that was the first thing. So that affected their performance. Then we had Cairns, the CEO, left under a bit of a mystery, which we know the story. We haven't got time to go into it now, but it's nothing, no big deal. No big deal. And then Hamish goes through a divorce, his wife leaves him then, and then they lose a massive mandate from the UK of 20 odd billion. So that set up in play a motion, a whole run of, "The sky is falling and this is going to go to zero." The funds under management have gone from 121 billion odd down to 70 odd. It's now stabilized, it appears. So it looks like what's going to go is gone. Cause there's been no news lately. So I suspect that's why the price is coming back a little bit because people are going, "This must be the bottom." And it probably is, is my view. Bear in mind also, Magellan is one of the most profitable businesses in the country. They make 60 cents on every dollar of gross revenue in profit after tax. So they have super low overheads and it means that if their earnings halve, they're still very profitable. So the P/E at the moment is 6.5 on last reported earnings. Let's halve them, and say the earnings are going to go down, they are going to go down significantly, probably not even a half, but let's say they go to half. That'd be then, P/E of 14. So 14 for Magellan and the quality of the business and what it is, stable is cheap. So I would argue Magellan's a buy at the current level, bearing in mind, and by the way, this is split within Teaminvest 60/40. So the feeling is 60% positive on being able to say the business will be bigger and stronger in five years. Yeah. That's the question. Not, is it going to bounce back? Right. And 40% aren't. Right. So it's not black and white. Okay. All right. You're saying at these levels... I'm in the glass half full. So, what about those who are bleeding from a falling knife? You just hold on? I would for sure. It's already like, it's down in the basement. Yeah. So, and the company is not going to go broke. That's why I was pointing it out about how profitable it is. There's no risk in this, unless they go, all the money leaves. That's not going to happen. Yeah. And it has started, it's back above the 50 day moving average, that's a positive. So yeah, if you bought it... Just asking for a friend.