Hi Peter,
You are correct, it’s been a very tough few years for Magellan (MFG), however successful investing it all about the future, not the past. We have been relatively active towards the stock and have made money from it overall across these two portfolios. To sum up our thesis on MFG at a high level;
- Approx. 50% of the company’s value is tied up in cash and investments, the actual funds management business is being priced on a mid single digit PE.
- Performance has turned, and that should lead to less outflows noting the stock is not priced for inflows, if they get these, it will be a bonus.
- The company has a strong balance sheet and carries no debt, with cash recently bolstered by ~$80m of sold fund investments, while capital disclosures indicate ~$311m of (liquid) strategic capital.
- We think they’ll launch more aggressive capital management.
- We value the stock at circa $11-$12, while it yields 7% FF.
We have covered MFG on several occasions and you can see the full history of our calls on the Magellan company page on the Market Matters website here, under Opinion or Action tabs.
