September, 2023
For the quarter, the largest contributors were the holdings in Intuit, Alphabet, Trane Technologies and UnitedHealth Group which all rose over 5% in the quarter. Intuit reported excellent quarterly results and issued FY24 guidance that highlighted the resilience of its business model and followed with an investor day showcasing how AI will be built into its product suite and the associated benefits. Alphabet reported quarter results demonstrating stable trends in advertising and continued cost control and has increasingly showed product innovation alleviating concerns of Search disruption from AI / ChatGPT. Trane Technologies delivered a robust secondquarter result and raised its full-year guidance with the ongoing strong demand in commercial HVAC a standout.
Detractors were led by LVMH, ASML, Chipotle Mexican Grill, HCA Healthcare and Apple. This serves as a strong reminder of how volatility is not risk. Three of these – HCA Healthcare, Chipotle Mexican Grill and ASML – were among our significant positive contributors in the year to June! As we highlighted then, we believe that these are superbly positioned and wellmanaged companies that should do well over the long term and our conviction remains high. LVMH has fallen back alongside the luxury sector as the big early 2023 uptick in the share price on expectations of a material boost from China’s reopening has reset and growth of the sector normalises from elevated levels. We do anticipate strength in Chinese offshore travel and spend on luxury in coming months and for wealthy consumers to continue to spend on LVMH products, albeit at a lower level of growth than seen in recent quarters.
Near-term softness in overall semiconductor demand (notwithstanding strong AI investments) has weighed on industry sentiment. Tool makers like ASML have also been affected by Taiwan Semiconductor Manufacturing Company potentially pushing out orders for its Arizona fab due to talent shortages. We see persistent, structurally higher demand ahead though the exact timing of orders is difficult to predict. Chipotle continues to see robust sales growth and improving cost levels and is executing superbly. The uptick in store expansion, towards a 10% run rate, is still expected but perhaps a little later in 2024. HCA has benefited from improving labour costs as use of relief nurses has fallen to more normal levels and hospital utilisation for surgeries and delayed procedures has come back. We expect Apple to deliver another good result this month – recent news regarding China’s government acting less favourably towards Apple bears watching.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/MAM-MGOC-Retail-Factsheet-September-2023-MGOC45199.pdfJune, 2023
A relatively concentrated portfolio of 20- 40 high quality securities constructed with strict risk discipline and macroeconomic insight seeking to achieve strong riskadjusted, not benchmark-relative returns.
Typical cash and cash equivalents exposure between 0 - 20%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/MAM-MGOC-Retail-Factsheet-June-2023-MGOC45107.pdfApril, 2023
A relatively concentrated portfolio of 20- 40 high quality securities constructed with strict risk discipline and macroeconomic insight seeking to achieve strong riskadjusted, not benchmark-relative returns. Typical cash and cash equivalents exposure between 0 - 20%
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/MAM-GLOBAL-Retail-Factsheet-April-2023-GLOBAL45046.pdfMarch, 2023
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/MAM-GLOBAL-Retail-Portfolio-Holdings-March-2023-MGOCPH0323.pdfJanuary, 2023
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/MAM-GLOBAL-Retail-Factsheet-January-2023-v2-GLOBAL44957.pdfDecember, 2022
The Magellan Global strategy rose for the quarter. The biggest positive contributions came from the investments in Mastercard, Visa and HCA, as well as McDonald's and Yum! Brands. With high inflation as a backdrop, these companies have positive exposure to nominal growth, and the resilience of consumer spending benefits these businesses. HCA and the restaurant chains are supported by normalising demand patterns in their businesses post the pandemic period.
The biggest detractors in local-currency terms in the quarter were Amazon, Alphabet and Crown Castle. Both Amazon and Alphabet have found themselves on the wrong side of excess demand driven by pandemic stimulus that is now unwinding, and ultra-low interest rates. Both are needing to cut costs to realign to normalising revenues and margins have been pressured. Crown Castle, like most in real estate, has been de-rated on higher interest rates but is also experiencing a slower outlook for growth in 2023 on lower demand from its telecommunications customers. We exited Crown Castle during the quarter.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/MAM-MGOC-Retail-Factsheet-December-2022-MGOC44926.pdfSeptember, 2022
The portfolio recorded a negative return for the quarter.
The biggest positive contributions came from the investments in Chipotle Mexican Grill, Diageo and Lowe's, three relatively defensive consumer companies that recorded strong operating performances in their most recent results and are seeing upgrades to earnings expectations.
Given widespread falls across the market, the biggest detractors in local-currency terms were the strategy's largest holdings of Microsoft, Alphabet and Visa. There was no material news of note for these companies but the strength of the US dollar is expected to weigh on reported earnings given their multinational businesses and the pressure of rising rates on economic growth will likely be felt by most companies. A new push for increased regulation of credit cards in the US was made and this may have added to caution on Visa.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/MAM-MGOC-Retail-Factsheet-September-2022-MGOC44834.pdfJune, 2022
The portfolio posted a negative return for the quarter. Among the biggest detractors were the investments in Alphabet, Microsoft and Intercontinental Exchange. Alphabet, the parent of Google, dropped after first-quarter revenue growth of 20% disappointed high expectations due to poorer-than-expected ad sales in Europe and on YouTube. Microsoft slid on news the EU is probing allegations the software giant has too much market power in the cloud-computing-services market. Intercontinental Exchange fell after it announced it agreed to acquire Black Knight, a software, data and analytics company that serves the mortgage industry, for US$13.1 billion in cash and stock. While the deal will likely take over a year to receive regulatory approval, in our view, it will be a positive transaction for the group as it digitalises the mortgage market.
The biggest contributors were our investments in Reckitt Benckiser, McDonald's and WEC Energy. The three are defensive and resilient businesses in the deteriorating economic outlook we face. All reported excellent results for the first quarter, beating market expectations and benefiting from strong pricing power and thus pass-through of cost inflation. McDonald's is also benefiting from the reopening of economies post the peak of covid-19 as patronage returns to its restaurants. WEC Energy, a US utility that supplies electricity and gas to Midwestern states, operates in a supportive regulatory environment and benefited from strong demand for gas during the US winter and growth in its 'rate base'.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/MAM-MGOC-Retail-Factsheet-June-2022-MGOC44742-v2.pdfMarch, 2022
Over the quarter, the portfolio recorded a return of -12.4% while the MSCI World Net Total Return Index delivered a return of -8.2%. We appreciate that investors expect the portfolio to provide downside protection through most market declines. We believe that recent portfolio changes will strengthen the portfolio’s ability to attain the strategy’s longterm objectives of competitive returns while avoiding permanent capital loss.
The fund’s long-term returns have been achieved by assembling a portfolio of resilient businesses that produce compounded returns that are acquired at what we regard as a material discount to their long-term prospects. The March quarter was characterised by outsized share-price responses to any earnings announcements that surprised investors. The fund is a long-term investor in businesses with above-average long-term prospects. Thus, the fund is well positioned for the long term, even allowing for volatility in shorter term share-price movements.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/MAM-MGOC-Retail-Factsheet-March-2022-MGOC44651.pdfDecember, 2021
The portfolio recorded a positive return in the quarter. The biggest contributors included the investments in Microsoft, Intercontinental Exchange and PepsiCo. Microsoft surged on a 22% jump in revenue for the third quarter as its cloud business benefited from the global shift to remote work. Intercontinental Exchange rose as energy derivative volumes climbed on the back of rising energy price volatility. PepsiCo gained after the drinks and snacks company raised its forecast for full-year earnings when announcing third-quarter profit and revenue (9% 'organic' growth) numbers that beat expectations.
The biggest detractors were the investments in Alibaba Group and Meta Platforms. Alibaba dropped after the Chinese tech company announced sales figures that disappointed for a second straight quarter and lowered its fiscal outlook for 2022, which fanned concerns about slowing consumer spending in China. Still, Alibaba announced a 29% rise in revenue for the September quarter and forecast 20% to 23% growth in fiscal 2022 revenue, rather than the 27% analysts were expecting. Meta fell after the renamed Facebook warned revenues in the fourth quarter will be knocked further by Apple’s privacy changes that restrict its ad-targeting, its third-quarter revenues fell short of expectations on Apple’s restrictions, and the company faced a public-relations blow and possible legal difficulties after a former employee exposed issues at the social-media company and that it was losing younger audiences.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/MAM-MGOC-Retail-Factsheet-December-2021-MGOC44561.pdfJune, 2021
The portfolio recorded a positive return for the quarter. The biggest contributors were the investments in Alphabet, Microsoft and Facebook. Alphabet rallied after the parent of Google reported that rising spending on digital ads boosted first-quarter sales to US$55.3 billion, a higher-than-expected rise of 34% from a year earlier.
Microsoft rose as rising demand for PCs, gaming consoles, and digital services delivered over the cloud boosted the software giant's firstquarter sales by a higher-than-expected 19% to US$41.7 billion. As well, in April, Microsoft agreed to buy speechrecognition firm Nuance Communications for US$19.7 billion, to expand the services it can offer business customers. Facebook surged after first-quarter sales smashed expectations to rise 48% to US$26.2 billion as advertisers sought access to the social media platform's 2.9 billion users and a US judge unexpectedly dismissed two complaints against the social-media giant from the US regulator because the judge said the Federal Trade Commission failed to prove the company was a monopoly.
The biggest detractors were the investments in Eversource Energy of the US, Tencent of China and WEC Energy of the US. Eversource Energy fell after the Connecticut Public Utility Regulatory Authority slammed the utility that through subsidiaries offers electricity, natural gas and water services for its preparation for and response to Tropical Storm Isaias that hit in 2020. In a politically charged decision, the authority found that Eversource did not satisfy relevant performance standards, ordered an indefinite reduction of 90 basis points to subsidiary Connecticut Light & Power's authorised return on equity, ordered the opening of a regulatory docket to consider issuing civil penalties against the subsidiary and foreshadowed the disallowance of certain costs that the authority asserts were imprudently incurred were Eversource to seek recovery. Eversource has indicated it will appeal these findings. Tencent fell as the Chinese government stepped up regulatory scrutiny of the country's largest technology stocks. WEC Energy, which provides electricity and gas across four Midwest states, slid on concerns that utilities were most vulnerable to any rise in interest rates.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/MAM-MGOC-Retail-Factsheet-June-2021-MGOC44377.pdfMarch, 2021
The portfolio recorded a positive return for the quarter in absolute terms. The biggest contributors were the investments in Alphabet, Tencent Holdings and Microsoft. Alphabet rallied 18% after its 23% surge in revenue for the fourth quarter that was driven by Search and YouTube advertising beat expectations. Tencent gained 8.2% after it was among the Chinese stocks that the Trump administration spared from its 'blacklist' of Chinese stocks. Microsoft added 6.2% after fourthquarter sales advanced a higher-than-expected 17% on pandemic-driven demand for video games and cloud resources. The biggest detractors were the investments in Netflix, PepsiCo and SAP. Netflix lost 3.5% as risk-taking investors rotated from streaming to legacy media companies. PepsiCo fell 3.8% as further restrictions on out-of-home activity were implemented, especially in Europe. SAP declined 2.6% as investors baulked at its shift to a cloud-based
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/MAM-MGOC-Retail-Factsheet-March-2021-MGOC44286-NEW.pdfDecember, 2020
The portfolio recorded a negative return for the quarter. The biggest detractors were the investments in Alibaba Group, SAP and RB. Alibaba dropped after its about-33%-owned Ant Group suspended its IPO, Chinese authorities said they would investigate the company for "suspected monopolistic conduct", key founder Jack Ma disappeared after criticising financial authorities, and the company's results for the September quarter displayed mixed results across segments. SAP dropped after Europe's largest software company lowered medium-term revenue and profit forecasts and its third-quarter result fell short of expectations as cloud revenue growth slowed. RB dropped on expectations sales for its sanitary products would drop once the pandemic is brought under control.
The biggest contributors were the investments in Alphabet, Starbucks and Tencent Holdings. Alphabet rose after its Google subsidiary's advertising revenue showed a better-than-expected rebound from the coronavirus-triggered slump and the US election outcome reduced the risk of a crackdown on Big Tech that would ensnare Google, which is already under anti-trust scrutiny by the US Department of Justice. Starbucks gained after the coffee chain, when announcing a smaller-than-expected drop in same-store sales of 9% for the fourth quarter, signalled that the worst is past. Tencent climbed after its 28% increase in revenue for the first half from a year earlier beat expectations.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/MAM-MGOC-Retail-Factsheet-December-2020-MGOC44196.pdfSeptember, 2020
Global stocks hit records highs in the three months to September as they rose for the sixth quarter in seven after reports showed stimulus is helping reopening economies recover from the pandemic, the Federal Reserve indicated it would keep rates low for a while yet, and tech stocks reported earnings that showed how much they have benefited from the shift to online. During the quarter, 10 of the 11 sectors rose in US-dollar terms. Consumer Discretionary (+16%) rose the most as economies reopened while Energy (-16%) was the sector that declined. The Morgan Stanley Capital International World Index climbed 7.9% in US dollars but, after a rise in the Australian dollar reduced gains for unhedged investors, rose only 3.7% in Australian currency.
US stocks set fresh record highs after readings showed the jobs market had recovered nearly half the jobs lost when the economy was closed to restrict the pandemic, Big Tech shone and the Federal Reserve moved to a flexible average inflation target by allowing inflation to exceed 2%. The Fed's shift suggested lower interest rates for longer as it indicated the central bank would not pre-emptively raise interest rates when unemployment was low so long as inflation was under control. During the quarter, reports indicated the US economy was recovering from the record 31.4% annualised decline in the second quarter. Of note, a report showed the jobless rate fell to 8.4% in August and that the economy had added 10.6 million jobs since it shredded 22.2 million jobs in March and April when the jobless rate was 14.7% (compared with 3.5% in February). Big Tech CEOs survived a grilling from congress over the alleged anti-competitive nature of their businesses as the tech icons posted healthy earnings for the second quarter. In political news, the Democratic and Republican parties held their conventions and at quarter end polls placed Democrat presidential nominee Joe Biden ahead of President Donald Trump in the quest for the White House. The S&P 500 Index rallied 8.5%, to complete its best back-to-back quarters since 2009.
European stocks fell as reinfection rates picked up enough for restrictions to be reimposed. Of note during the quarter was that EU leaders struck an agreement to allow the EU to sell debt on a large scale for the first time so it could install a 750-billion-euro pandemic recovery fund. The Euro Stoxx 50 Index fell 1.3%. Japan's Nikkei 225 Index added 4.0% on the better global outlook as investors looked past the record annualised economic contraction of 28.1% in the second quarter and the unexpected resignation due to ill health of Prime Minister Shinzō Abe (who was replaced by Yoshihide Suga). China's CSI 300 Index surged 10.2% after a report showed the country's economy grew 3.2% in the June quarter from a year earlier, making China the first major economy to return to growth. Australia's S&P/ASX 200 Accumulation Index lost 0.4% amid concerns that Victoria's second lockdown was causing vast economic damage. The MSCI Emerging Markets Index rallied 8.7% in US dollars as key countries contained the virus and commodity prices gained.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/MAM-MGF-Retail-Factsheet-September-2020-MGF44104.pdfticker: MGE0001AU
commentary_block: Array
factsheet_url:
Under Fund Commentary, Quarterly
release_schedule: Quarterly
fund_features:
Magellan Global Fund perceives outstanding companies to be those that are able to sustainably exploit competitive advantages in order to continually earn returns on capital that are materially in excess of their cost of capital. It aims to achieve attractive risk-adjusted returns over the medium to long term.
- A specialised and focused long-only global equity fund.
- Relatively concentrated portfolio of typically 20 to 40 high quality securities.
- Benchmark unaware.
- Maximum cash position of 20%.
- AUD $10,000 minimum investment amounts.
manager_contact_details: Array
asset_class: Foreign Equity
asset_category: Large Blend - Fundamental
peer_benchmark: Foreign Equity - Large Fundamental Index
broad_market_index: Developed -World Index
structure: Managed Fund