The Macquarie Group Ltd (ASX: MQG) share price is up slightly at $178.44 in lunchtime trading, 0.25% above yesterday's closing price. Over the year to date, Macquarie shares are down 16%.
Not to worry, says this fund manager. He reckons Macquarie is an "obvious" pick for investors due to the high quality of its business. Plus he thinks the Macquarie share price will outperform in the medium term.
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Green energy infrastructure to boost Macquarie share price
Australian Eagle Asset Management chief investment officer Sean Sequeira said Macquarie is a quality business that the fund has held since 2013.
He writes on Livewire:
The positive view on the company would seem obvious…
In terms of the Australian Eagle process, we try to determine, not just the quality of the company, but the changes that are evidently taking place that may drive an improvement in earnings growth and/or quality of those earnings.
Sequeira said this is the second time Australian Eagle has taken a position in Macquarie shares. Last time they held Macquarie, they sold it in 2007 before the global financial crisis struck.
At its highest point in 2007, the Macquarie share price was trading at about $95. This followed a phenomenal 460% increase since listing on the ASX in 1999.
Then in 2013, Australian Eagle bought back in when Macquarie sold its Sydney Airport holdings "to recycle this investment into less capital-intensive but higher-returning assets".
The fund liked this pivot by Macquarie management, saying:
This redeployment of capital confirmed management's willingness and ability to meaningfully adjust the company's portfolio into higher returning exposures.
The change in corporate focus and subsequent improving Return on Equity (RoE) metrics provided us with the improvement in quality that we needed to see for the stock to command a position in our portfolio.
Fund has higher conviction in Macquarie shares today
Sequeira said the fund has a higher conviction and investment in Macquarie shares this time around.
A big factor giving them confidence in Macquarie shares was the 2.3 billion pound acquisition of the United Kingdom's Green Investment Bank Limited in 2017.
At the time, Green Investment Bank was a leading investor in green infrastructure in the UK and Europe.
Sequeira said the acquisition was "likely to support an acceleration in earnings growth".
Today, he reckons Macquarie is "the market leader in infrastructure projects for both financial advice and as a fund manager".
Macquarie FUM could grow by 20%
Sequeira points to Macquarie's 1H FY23 results announced last month. The numbers showed $30 billion in committed funds management equity waiting to be spent.
Sequeira said:
This means Macquarie's Real Asset FUM has the potential to grow by 20 per cent as deals are consummated.
This is further evidence that the structural nature of energy transition infrastructure spending supported by international government policy is expected to support a stronger medium term earnings growth profile.
He believes these tailwinds should result in medium-term outperformance for the Macquarie share price.
