Macquarie Group Ltd (ASX: MQG) is a business with a finger in many pies, courtesy of its massive size and global footprint.
This scale brings a lot of opportunities to investors, who have enjoyed consistent dividends for each of the past 15 years (and beyond) as well as decent capital growth over that time.
More recently, Macquarie has thrashed the market, rising 34% this year, over 200% since early 2012, and 118% in the past five years.
With the scope of its recent rise, many investors will ask if there is still value to be found in Macquarie Group today. It's an important question, and to my mind there are several things to take into account.
- Where is the money coming from?
Macquarie is Australia's largest asset manager and one of the 50 largest worldwide. It earns 30% of its net operating income in Australia, 22% in Europe, Middle East, and Africa (EMEA), 36% from the Americas, and 12% in Asia.
22% of revenues come from Asset and Wealth Management, 27% from Financial Markets, 15% from Capital Markets, and 37% from Lending.
Shareholders get an income stream that is reasonably diversified in terms of both type and geographic source, as well as envious foreign currency exposure.
However, it is worth remembering that a significant percentage of revenue is at risk should markets crash.
- Is there more money coming in the future?
Macquarie looks fully valued for the moment, bearing in mind the company's exposure to cyclical risks such as lending activity, property development, and the stock market.
However, the company is continuously investing in a variety of opportunities like the Property IQ partnership and aged care venture in China that are likely to deliver steady, incremental growth to shareholders over time.
Importantly, the company is in a sound position financially, and management has indicated it will tap shareholders for capital as and when large acquisition opportunities present themselves. Given the company's global footprint I expect a steady string of earnings-accretive opportunities will continue to present themselves over the long term.
- Well, is it going to go up?
There's always an element of witchcraft involved in making short-term price predictions. Based on the phase of the moon, price responses to recent announcements and the factors mentioned above, I would not be surprised to see Macquarie Group breach $100 per share in the next few years.
With that said however, I do not believe the stock is an outstanding buying opportunity right now. Macquarie is a solid business but there are a number of other opportunities out there for shareholders looking to pick up a real bargain.
