The Macquarie Group Ltd (ASX: MQG) share price has done very well for shareholders since the bottom of the GFC. In almost a decade it has grown from a low of $17.30 to today’s $113.20.
There could be a lot of growth yet to come with how Macquarie is investing for the future. In its full-year profit result it revealed net profit growth of 15% compared to FY17 and an 11.7% increase to the dividend.
The investment bank has been focusing on less-cyclical businesses which it describes as “annuity-style businesses”, the net profit contribution from this segment increased by 6%. The key part to this is that Macquarie can generate a regular management fee.
I generally avoid all types of banks, I believe they are too cyclical and also are at risk of increasing regulatory punishment. However, I would put Macquarie in a different basket.
A majority of its earnings are earned overseas with Australia now only representing a third of total income.
Macquarie has proven to be the number one infrastructure manager globally, based on assets under management. It is this area where Macquarie can continue to excel because infrastructure spending is likely to increase around the world.
Australian cities are going through another infrastructure boom and President Trump is also pouring money into infrastructure spending. Asian cities will require large sums of money to maintain their effectiveness. Plus, renewable energy is continuously reducing in cost and therefore around the world businesses, governments and individuals are investing into renewables. Macquarie recently bought the Green Bank in the UK to take advantage of the renewable sector.
Each of the above areas is a big opportunity for Macquarie to apply its market-leading expertise into. The infrastructure spending will continue, regardless of whether the economy is booming or trundling along.
Macquarie is, by far, my favourite bank listed on the ASX. Its global earnings and infrastructure focus give it a very different look to Commonwealth Bank of Australia (ASX: CBA) and Bank of Queensland Limited (ASX: BOQ).
It’s currently trading at 15x FY18’s estimated earnings. I think this a fair price to buy for a business that is comfortably beating the ASX index. However, I am personally waiting until the next recession to buy shares because finance shares are usually hit harder than other sectors.
Until then, I’ll be looking to put my finance sector investing money into one of these hot stocks instead.
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Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.