ASX Shares Magellan Financial Group (MFG): meteoric rise in 2019

All successful strategies have drawdowns. The secret to winning active is still being in the game after a bad run. PTM are still alive even though many investors have abandoned hope - seems a prerequisite really for the bottom.

This slide sums up the PTM investment case.



Their strategy outperforms when the markets turn from stories facilitating unfettered price expansion to valuation and income generation. I'm punting that we are in an for an extended period of the latter and in turn that people will continue chasing near term historical returns post this return to favorable conditions for their style. Worth a cyclical punt. If I believe passive continues to take over active market share than this is cyclical not longgg term hold - I'm not sure? At the minimum fees come down but that's arguably factored into the undemanding current price.

I started accumulating with an allocation to Judith Nelsons' second block in Jan and hit it pretty hard again yesterday. I'm typically early into positions, I suffer from pre-mature accumulation but time puts many things right if you don't muck up valuation assumptions too badly. Even with fee reductions I don't see how it doesn't have a cash payback period of less than 10 years unless cash flow valuation has forever lost its influences in the markets and their style never comes back, which also means I'm a dinosaur.

One concern is that PPT (disclosure - also hold) has made a better fist of the early change in market sentiment. PTM's index shorting has hurt returns to date.

Getting back on topic. Magellan are starting to make the right noises about knuckling down for the winter. The unproven test however, is can they survive if winter lasts 10 years for them as it did for PTM.

 

Platinum update:
Why Platinum is short US tech stocks and long China

 

‘Challenging period’: Magellan offers staff bonuses to stay

Troubled fund manager Magellan has unveiled a financial package of bonuses and options designed to retain staff after a turbulent few months of leadership instability, share price destruction and mounting outflows.

Magellan on Thursday announced it would give staff who remained at the company for at least another two years a combination of extra bonuses and options, in an effort to prevent staff attrition.

Magellan (ASX:MFG) share price dips despite free gift bonanza

• Magellan shares extend losses today after a company announcement
• The update isn't enough to have investors biting today – perhaps as it applies to eligible shareholders
• The Magellan share price has collapsed 77% in the past 12 months

 

PTM keeps losing FUM and shareholder value. I thought it was a low risk play at 2.30. Now it looks cheap at 1.89. Not sure it could ever go bust, but that is the direction it is moving. ETFs will continue to increase inflows and there is no certainty that the value factor will ever return.

Not advice