Share markets rose remarkably in January, with the S&P/ASX 200 Index (ASX: XJO) rocketing 6.22% during the month.
Whether the surge is sustainable or if it's yet another bear market rally is up for debate. But the gains have caused many punters to wake up and pay attention to ASX shares once again.
With a looming economic downturn, it's fair to say investors are looking at big brand names to seek quality businesses to buy.
Three such names are Seek Ltd (ASX: SEK), Magellan Financial Group Ltd (ASX: MFG), and Virgin Australia.
The first two have, in the past, made many investors wealthy but have crashed during the past 13 months for both external and internal reasons.
Virgin, meanwhile, was delisted and went into administration in 2020 after COVID-19 brought aviation to a standstill. But its private equity owner is expected to float it once again this year, taking advantage of a post-pandemic boom in travel.
So should you buy this trio? Shaw and Partners portfolio manager James Gerrish examined their prospects:
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Aeroplanes, jobs and investments
Gerrish, in a Market Matters Q&A, warned that private equity initial public offers (IPOs) "generally have a history of underperformance".
"It is also a fair assumption that Bain, the private equity firm… will unload some shares sooner or later given its 95% stake in the airliner."
As a counterbalance to that, Gerrish does like Virgin's recovery out of the coronavirus pandemic and its new fleet of fuel-efficient Boeing 737 Max-8 planes.
"However, this [will] not suffice and we like other opportunities in the market with much more depth and key macro themes to support it."
Of course, the issue price per share at the IPO will also be a consideration. But Gerrish is not expecting a bargain.
"My best guess is it will be priced fairly richly following the strong advance by Qantas Airways Limited (ASX: QAN) post-COVID."
Gerrish's team has ridden Seek's 20% rise over the past quarter but thinks the jobs classified site's had its run now.
"If Seek was a standalone holding we would indeed have looked to sell into its recent pop to fresh 5-month highs," he said.
"From a stock sector perspective, as we've alluded to over recent weeks, we are looking for tech names to continue their bounce in line with the Nasdaq Composite (NASDAQ: .IXIC), but we do intend to reduce our exposure into such a move."
Magellan has horrifyingly lost 80% of its value over the past 18 months, as a series of highly publicised governance and performance issues dogged the fund manager.
Its funds were US tech-orientated, so the NASDAQ's decline over that time hasn't helped either.
According to Gerrish, Magellan has diversified a bit more in recent times.
"In December 2022, the High Conviction Trust's top 5 holdings were Alphabet Inc (NASDAQ: GOOGL), Intercontinental Exchange Inc (NYSE: ICE), Microsoft Corp (NASDAQ: MSFT), Visa Inc (NYSE: V) and Yum! Brands Inc (NYSE: YUM)."
Therefore the performance of its funds will not necessarily strictly follow the NASDAQ anymore.
But Gerrish is not upbeat about the business.
"Performance is what this stock needs to get back on track. However, if outflows continue at similar rates and possible management fees are lowered in an attempt to maintain FUM [funds under management], we think the stock will simply continue to slide lower."
