Magellan Financial Group Ltd (ASX: MFG) is one of the ASX's most successful fund managers. It has (as of 31 October) just over $103 billion in assets under management, making it one of the largest fundies in Australia as well.
Chief investment officer and co-founder, billionaire Hamish Douglass, is someone that many ASX investors look to for advice and guidance, given the stellar performance of Magellan's funds. As an example, the unlisted flagship Magellan Global Fund (a managed fund) has returned an average of 15.91% per annum over the past decade.
So here's a look at the shares that Magellan was buying (and holding) in October.
Magellan in the spotlight
According to the company's latest updates, the Global Fund is 88% invested in shares, and is holding 12% cash. Magellan lists the top 10 holdings of the Global Fund (in alphabetical order) as follows:
- Alibaba Group Holding Ltd (NYSE: BABA)
- Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL)
- Facebook Inc (NNASDAQ: FB)
- Microsoft Corporation (NASDAQ: MSFT)
- Novartis AG
- Reckitt Benckiser Group
- Starbucks Corporation (NASDAQ: SBUX)
- Tencent Holdings (OTCMKTS: TCEHY)
- WEC Energy Group Inc (NYSE: WEC)
- Xcel Energy Inc (NASDAQ: XEL)
The Global Fund portfolio typically holds between 20 and 40 stocks, and targets a cash distribution yield of 4% annually. As of October, the fund is positioned with 40% of holdings in US companies, 12% in Western Europe, 19% in China and 17% in other countries.
Let's turn to Magellan's High Conviction Fund, which instead aims to hold between 8-12 companies in a concentrated portfolio, and targets a 3% annual cash distribution yield. Magellan tells us that, again, the fund is 88% invested and is holding 12% cash.
The Magellan High Conviction Fund's top 5 holdings are as follows:
- Alibaba Group
- Alphabet
- Microsoft
- Starbucks
- Tencent
This fund is more balanced, geographically speaking, than the Global Fund. 30% of its holdings are in US companies, with another 30% in Chinese companies. Western Europe is at 12%, with other countries at 17%. Unlike the Global Fund (which is unhedged), the High Conviction Fund has the ability to hedge its cash positions against different currencies. The update tells us that the High Conviction Fund's cash reserves were hedged 17% to the Australian dollar, as of 31 October.
What can we learn from these holdings?
Going off the 2 funds' portfolios, we can see a number of companies are consistent, large positions across both funds. These are namely 'big tech' stocks like Alphabet and Microsoft, as well as the Chinese e-commerce giants Alibaba and Tencent. Consumer staples also feature heavily, with Starbucks' presence in both portfolios, as well as the Global Fund's position in Reckitt Benckiser (maker of products like Dettol, Air Wick and Clearasil)
