While the Financial Services sector has been hammered in 2019 amid ongoing Royal Commission scrutiny and tightening lending growth, one share price has been rocketing higher: Magellan Financial Group Ltd (ASX: MFG).
The Magellan share price is up over 50% to $36.07 per share so far this year as it has outpaced fellow wealth managers Janus Henderson Group PLC (ASX: JHG) and Platinum Asset Management Ltd (ASX: PTM) which are up 18% and 13%, respectively.
Magellan has proven to not only outperform the Financial Services sector as a whole, but also sit high amongst the S&P/ASX200 Index (ASX: XJO) gainers for the year-to-date and is up nearly 1% today as the Aussie market has traded relatively flat.
What's driving the Magellan share price higher?
The international equities manager has been buoyed by a better-than-expected result on the legal and regulatory front for the wealth management sector in the wake of Kenneth Hayne's Royal Commission recommendations.
While this has been a big boost for the share price, following significant declines in the last 12-18 months amid bad press and fears of reduced growth prospects, Magellan has also managed to retain and even grow its half-year average funds under management (FUM). For the half-year ended 31 December 2018, management expected to see average FUM come in at $72 billion, compared to $53.6 billion in the prior corresponding period (pcp).
The investment group has forecast double-digit profit growth for FY19 despite challenging conditions in global equity markets and headwinds including Brexit and the US-China trade war looming in Q2 2019.
Magellan has looked cheap for quite a while and currently trades on a 19x price-earnings (P/E) multiple with a 4.55% dividend yield that looks quite attractive from a relative value perspective.
Is Magellan a Buy?
I think that while Magellan has bounced back strongly to start the year, I wouldn't be jumping in just yet. There's a lot of volatility still to come in the months ahead particularly with the Federal Election coming up and the potential for significant regulatory changes to wealth management under a Labor government.
In the meantime, investors hunting for the next hot stock should check out these top growth shares that have been tipped as market beaters.
