Why the Magellan share price might be a post-earnings buy today

Is the Magellan Financial Group Ltd (ASX: MFG) share price a buy today after the company reported its earnings and growth plans?

| More on:
hand holding wooden blocks spelling the word buy

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Magellan Financial Group Ltd (ASX: MFG), as of this morning, has joined the small but growing list of ASX companies that have now disclosed their FY2020 full-year earnings in this August reporting season.

By all indications, it has been well received by investors — judging by the 2.7% the market has added to Magellan shares today (at the time of writing). And fair enough too. The company did deliver a 20% rise in net profit after tax and a 10% bump for its dividend. Not bad for a year containing a pandemic and a share market crash.

So at its current level of $63.34 per share, is the Magellan share price a buy today?

What’s new at Magellan?

Magellan is amongst the largest fund managers in the country. It has exploded in value in recent years as it drew in investors with its globally focused, outperforming funds. For some context, 5 years ago Magellan was only asking around $19 a share. Fund managers are often quite cyclical or volatile companies as investors tend to pile in when markets are booming and pile out again when market’s crash.

We saw this in play earlier in the year, when Magellan went from around $75 a share to roughly $35 in the space of a month back in March and April. However, the share price has quickly rebounded in recent months, helped by massive fund inflows and continued outperformance during the market crash. To illustrate, Magellan’s flagship Global Fund has returned -0.25% over the past 6 months, which compares nicely against the -13.7% that the S&P/ASX 200 Index (ASX: XJO) has delivered over the same period.

Magellan has also announced a few new developments over the past week or 2. It will be restructuring its unlisted Global Fund and its listed equivalents — the Magellan Global Trust (ASX: MGG) and the Magellan Global Equities Fund (ASX: MGE) — into a ~$15 billion consolidated fund that will offer both open- and closed-ended units.

Along with its earnings today, Magellan also announced it will be expanding into offering low-cost, diversified exchange-traded products under a new ‘MFG Core’ brand. According to reporting in the Australian Financial Review (AFR), these new ‘Core’ funds will offer management fees of just 0.5% per annum and will follow an ‘active ETF’ model.

Is the Magellan share price a buy today?

I think Magellan is a great company and one that any ASX investor can consider adding to their portfolios. It’s reasonably priced (in my opinion) right now at nearly 15% off of its 52-week high for one. I also think that the new initiatives that Magellan are pursuing are very positive and will likely lead to strong growth in the months and years ahead. Thus, I would absolutely consider the current Magellan share price a buy today.

Motley Fool contributor Sebastian Bowen owns shares of Magellan High Conviction Trust. 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.

More on Share Gainers

A boy leaps and flaps his arms as he tries to fly with some birds on the shoreline of the beach.
Share Gainers

5 best ASX All Ordinaries shares in June

Why did these ASX shares fly while the All Ords dropped?

Read more »

a man looks down at his phone with a look of happy surprise on his face as though he is thrilled with good news.
Share Gainers

Why Austal, Mesoblast, Regis Resources, and Zip shares are charging higher

These ASX shares are ending the week strongly...

Read more »

Three rockets heading to space
Share Gainers

These 3 ASX All Ords shares are delivering double-digit gains on Friday

These stocks have each surged more than 20% today.

Read more »

a man in a green and gold Australian athletic kit roars ecstatically with a wide open mouth while his hands are clenched and raised as a shower of gold confetti falls in the sky around him.

Why is the Northern Star share price more green than gold on Friday?

It's proving a good day so far for the gold miner, despite the price of the yellow metal falling.

Read more »

Rising arrow on a blue graph symbolising a rising share price.
Share Gainers

Why is the Mesoblast share price leaping 19% today?

Mesoblast reverses course today – for now, anyway.

Read more »

a group of young people dance together with their hands in the air, moving to music.
Share Gainers

What’s propelling the MoneyMe share price 28% higher today?

Investors have rewarded the company handsomely today.

Read more »

a man and a woman sitting in a technology related work environment high five each other while the man wears headphones around his heck and the woman sits in front of a laptop.
Share Gainers

Domestic bliss: Praemium share price surges 18% after international business split

The tech company will now focus on the domestic market.

Read more »

Young woman in yellow striped top with laptop raises arm in victory
Share Gainers

These were the best performing ASX 200 shares in June

These ASX 200 shares defied the market selloff and stormed higher...

Read more »