Investment bank Macquarie Group Ltd (ASX: MQG) has been an investors' darling over the years, but the stock price has slumped in recent weeks.
Macquarie shares are down about 8.5% since 7 March.
One could wonder why this was happening, considering the finance giant had not announced any adverse news.
Shaw and Partners portfolio manager James Gerrish explored the reasons for this dip and whether Macquarie is worth buying and holding.
Diversification within one stock
Firstly, Gerrish felt like the latest earnings result was positive.
"It was a good result [but] I suspect the market was slightly concerned by the proportion of their earnings that came from the commodities division as a result of volatility caused in part by Russia," he told a Market Matters Q&A.
"If that's an anomaly, they won't have that tailwind again."
The great feature of Macquarie's business model is that it has fingers in many pies. That means even if the benefits from the Ukraine crisis ebb away, other parts of the company will pick up the slack.
"There are offsets, insofar as less volatility from a broader markets perspective will generally mean more M&A and deal flow, which was soft in the result they delivered," said Gerrish.
"Ultimately, it's the reason we like the stock. Different divisions perform differently at different times and that creates a nice level of diversification in their earnings."
Long term wealth creator
For Gerrish's team, Macquarie shares are worth grabbing now.
"We own Macquarie and intend to hold it."
For perspective, the Macquarie share price is down 1.8% over the past year while the broader S&P/ASX 200 Index (ASX: XJO) has gained 2.3%.
Macquarie shares have gained 53.75% over the past five years, and currently pay out a dividend yield of 4.3%.
The finance giant was recently revealed as the ninth most held stock in the portfolios of millionaires.
