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3 reasons to BUY Macquarie Group Ltd

Investment bank Macquarie Group Ltd (ASX: MQG) has had a stellar 24 months on the ASX. Its share price has climbed from just $26 to over $60, representing a gain of 116% before dividends. This compares with a return of just 33% from the S&P/ASX200 (ASX: XJO) (INDEX: ^AXJO).

But, can it continue?

I doubt it’ll continue on its current trajectory in the near-term but it could hold significant value for those focused on the long term. Specifically, those who want exposure to world markets and wish to receive regular dividend payments should consider Macquarie Group.

Here are three reasons why Macquarie could be a worthy addition to your portfolio today.

1. Rising confidence in global markets. Macquarie draws 68% of its income from international markets. Its earnings performance is largely dependent upon investors’ confidence. This was evident from its 49% profit growth in FY14 as well as its growth in assets under management (AUM), which totalled $424.8 billion.

2. Ample growth opportunities. Macquarie has a total of six different business units which all produced strong profit growth in the recent full year. From Asian markets, where its funds management business has huge infrastructure investments, to expert commodities research, mortgages and mergers & acquisitions – Macquarie’s management can grow the business in many different directions.

3. Conservative balance sheets. The big four Australian banks have an average APRA Common Equity Tier 1 ratio of 8.57% – which essentially is a measure of the banks’ financial strength – but Macquarie’s ratio in FY14 was 9.6% – well above the regulator’s requirements and the ratio of any of the Big Four. In addition its balance sheet management is strong and diverse with deposits representing 40% of total funding with minimal reliance on short-term wholesale funding markets.

To buy, or not

Macquarie Group currently trades on a forward price-earnings ratio of 14.5, dividend yield of 4.9% and price-book ratio of 1.7. With the recent run-up in price I believe possible short-term gains are fully priced-in but, longer term, it will likely prove to be a worthwhile investment. As such I believe it is a good buy, but not great.

However, there is one ASX stock I think is a GREAT buy for its current price. And The Motley Fool's Best Analysts agree. They've dubbed it, "The Motley Fool's Top Stock for 2014". It pays a magnificent dividend and has grown earnings for the last 6 years but IT'S STILL CHEAP! Best of all: It's yours FREESimply click here for your copy of "The Motley Fool's Top Stock for 2014."

Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies. 

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