Magellan Financial Group Ltd (ASX: MFG) has been one of the top performing stocks on the ASX over the past eight years with the share price up around 500% since listing in December 2006.
The share price growth is not unfounded. The fund manager – which was established by CEO and portfolio manager Hamish Douglass – began life with funds under management (FUM) of around $400 million. Since then the group, which focuses on global equities and infrastructure strategies, has not only grown thanks to impressive portfolio returns, but it has also attracted billions more in FUM.
As at August 2014 total FUM stood at $25 billion!
With the focus on buying shares in very large global companies such as eBay Inc and Microsoft, Magellan has the capacity to manage billions more. In fact, management openly states that they believe their strategies and structure can support a current theoretical capacity of US$50 billion in FUM.
Early mover advantage
Despite the tiny size of the ASX as a percentage of global equities – the ASX only represents around 2.5% of the global MSCI Index – most Australians have an excessive skew towards domestic shares.
Investors and advisors finally appear to be awakening to the opportunity that international investing adds. This has left a number of domestic funds scrambling to offer global capabilities to their clients, a service Magellan has become a leader in.
Top Stock
Magellan's outstanding share price appreciation appears to have caused the stock to run out of puff in the last 12 months. Despite hefty growth in FUM, the share price gains have been more muted, although still good with the one-year return from Magellan being 12% which certainly beats the S&P/ASX 200's (INDEXASX: XJO) 4% rise.
This slowdown could be a positive for long-term investors as it has arguably allowed the value of the company to catch up to its roaring share price. Now could be an appealing entry point into a company which could very well be described as the top financial stock not just of 2014, but also of the past eight years.
