The Magellan Financial Group Ltd (ASX: MFG) share price has been on a rollercoaster in recent weeks after the market reacted to news the company's former star-stock picker offloaded a huge parcel of its securities.
An entity associated with Magellan co-founder Hamish Douglass – who stepped down as the company's chair earlier this year before returning in a consultancy role – sold 13 million of the company's shares earlier this month.
The Magellan share price tumbled 5% in the days following the sale. Since then, it has posted a 9% gain. Right now, stock in the fund manager is swapping hands for $9.91 apiece.
So, should investors follow the lead of the notable insider and sell down their holdings in the S&P/ASX 200 Index (ASX: XJO) financials icon? Here's what one fundie reckons.
Why this fundie tips Magellan shares as a sell
News that Douglass sold a $118 million parcel of Magellan shares might not have left a long-term sour taste in the market's mouth, but it did raise the eyebrows of one fundie.
Peak Asset Management founder and executive director Niv Dagan believes it's time to sell out of the company, as per The Bull.
One reason behind his bearishness is Douglass' recent sale, which the insider told the market was for "family diversification purposes".
Another was the fund manager's notable outflows.
Magellan experienced $2.4 billion of net outflows in October. Of that, $400 million was retail, and $2 billion was institutional. It followed the company's $3.6 billion September outflow and its $1.3 billion August outflow.
Though, October wasn't all bad. A weaker Aussie dollar and market strength saw the company boast $51 billion of funds under management at the end of October. That's up from $50.9 billion on 30 September.
Finally, Dagan cited the company's embattled share price as another reason he thinks the stock is a sell.
The Magellan share price has lost nearly half its value in 2022. It started the year trading at $19.40.
