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How nabtraders are responding to Magellan’s horror week

While Christmas is a traditionally quiet time for markets, investors still have much to watch heading into the holiday season. The ASX200 closed up a third of a percent at 7387 points on Thursday; it is up over 1% over the week. Despite falling from its highs in July, the market is currently up over 12% in price terms for 2021, an incredibly strong result given the resurgence of Covid and emerging global threats including supply chain pressures and rising interest rates.

The second last week of the trading year has thrown up a couple of significant new stories, the most significant for many being the falling prospects of high flying global funds management business Magellan Financial Group (MFG). Chief Investment Officer Hamish Douglass is one of Australia’s best known fund managers, and the firm’s fortunes have soared after Douglass’ exceptional post-GFC stock-picking. Magellan’s flagship international equities fund saw huge inflows not just from domestic financial planners and their clients, but international pension funds and institutional investors over a decade ago and each year since, but recent significant underperformance has seen flows wane. In the meantime, MFG’s share price has risen over 1400% over ten years, but is down 11% over 5 years and has fallen over 60% this year. The catalyst for this fall has been the sudden resignation of CEO Brett Cairns, rumours about Douglass’ marriage and the cancellation of a significant mandate, which saw the stock fall over 30% this week, before bouncing 5% on Thursday. Nabtrade investors, who’ve keenly watched the stock and follow Douglass’ investment commentary, bought the stock in hugely volumes on Monday, although only 15% of trades were over $100,000, and average sizes were at the lower end.

 

Magellan Financial Group (MFG) share price over 10 years

Source: nabtrade

 

Apart from the drama at Magellan, serious traders continued to focus on Fortescue Metals Group (FMG). With the iron ore price jumping to two month highs on hopes that China’s demand will continue, Fortescue is now trading nearly 40% above its recent lows; traders are still buying at this price. Investors have been trimming Rio Tinto (RIO) as it holds just below $100, while BHP (BHP) is a modest buy above $40.

Westpac (WBC) continues to be the favourite buy among investors, although it is also traded by higher value traders on volatility. As the least expensive of the banks, many are hoping for a turnaround, although its full year results were not promising. ANZ (ANZ) has also seen strong buying in small volumes, while Macquarie Group (MQG) has been trimmed.

The buy now, pay later sector has been very quiet since US giant Square (now Block; SQ.US) announced its takeover offer for Afterpay (APT). This week Humm Group (HUM) spiked nearly 30% on an announcement that suggested Humm may be the next takeover target in the sector. Although no detail was provided, investors were very excited and sold – some were locking in profits, while others were cutting their losses, given the share price remains down nearly 20% over twelve months.

 

Humm Group (HUM) share price over 12 months 

Source: nabtrade

 

On international markets, Apple (APPL.US) was traded in larger values than Tesla (TSLA.US) for the first time in several months; both stocks were a buy. Nvidia (NVDA.US) was traded in significant volumes earlier in the week; while off its recent highs, Nvidia is still up nearly 130% over the year, and is on a PE multiple of 90x. Large scale holders were selling.

 

 

Analysis as at 23 December 2021. This information has been provided by WealthHub Securities Ltd the ASIC Market Integrity Rules and a wholly owned subsidiary of National Australia Bank Limited ABN 12 004 044 937 AFSL 230686 (NAB). Whilst all reasonable care has been taken by WealthHub Securities in reviewing this material, this content does not represent the view or opinions of WealthHub Securities. Any statements as to past performance do not represent future performance. Any advice contained in the Information has been prepared by WealthHub Securities without taking into account your objectives, financial situation or needs. Before acting on any such advice, we recommend that you consider whether it is appropriate for your circumstances. This article does not reflect the views of WealthHub Securities Limited.

About the author
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Gemma Dale , nabtrade

Gemma Dale is Director of SMSF and Investor Behaviour at nabtrade. She is the host of the Your Wealth podcast, a fortnightly podcast for investors, featuring insights and updates from markets and finance experts across a range of topics. She provides regular market and finance commentary on ausbiz and in other media including AFR, the Australian, ABC and commercial tv and radio. Gemma was previously the Head of SMSF Solutions for nab, and the Head of Technical Services for MLC, where she led a team of specialists providing advice to advisers and their clients on SMSF, super, tax, social security and aged care.

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Gemma Dale

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