MFF Magellan flagship fund

[ratkin]

Lifted from the other forum to a more appropriate place

I have been adding to my holdings of MFF an australian listed fund.
This fund has a Buffet style approach and in concentrated on big global brands , mainly american companies.
Im expecting the DOW to outperform our markets this year and current weakness has been used by the fund to buy decent stocks.
Its ten main holdings are

American express
Ebay
Nestle
Yum Brands
SLM corp
Bank of America
Johnsone and Johnsone
Walmart
Pepsico
Lowes

[ratkin]

Michael posted the following reply



It looks like management also adding to their personal holdings in the fund.

Interesting fund, they did a small presentation o American Express, this company also caught my eye at recent prices, and have been thinking about buying some - wide economic moat, incredible business model roe / and while they are big there is plenty of growth left in them with 86% of the world still using cash Vs plastic.

From memory think AXP is number two holding in Berkshire Hathaway Portfolio, after Coke.

Also note MFF hold Bank of America and Johnson & Johnson - Buffet also buying these recently, so while emulating the Oracle of Omaha may seem boring and unimaginative - coat tail investors buying after Berkshire substantial holder notices still outperform over time - which goes to show that BRK are so contrarian that even most instos are afraid to follow them...!!

[ratkin]

See motley fool have Johnson and Johnsone and yum brands down as two of their best ten stocks for 2008.

I particularly like yum brands , they are making huge inroads into china and proving to be very popular. They own taco bell , kfc and pizza hut and other major brands. Growth in traditional markets may of slowed but they are expanding very fast in asia , plenty of potential left for growth.

MFF listed at 1.00 , the NTA of their portfolio has fallen slightly but is well above the current price of 78c.
They have been hit by a rampant aussie versus american dollar , plus the credit crunch has scared many away from american stocks.
Many also bought the fund on listing to gain access to the magellan group as a whole and have since ofloaded the fund holdings, that also helped keep the shareprice down

MFF have been using market weakness to buy up quality household names which have a considerable margin of safety. They are very much focussed on the longer term and once the american dollar and markets recover their should be plenty of upside with very limited downside risk at current prices.

I had looked into buying some american companies myself but felt it would be better to use MFF i have confidence in their approach and skills and they can provide better diversification than i could by buying individual stocks myself

[Lizard]

I took some MFF at listing - more than I really wanted to so as to give me a worthwhile amount of MFG/MFGOA rights. Reduced the MFF post rights, as was disappointed at their decision not to hedge currency. However, at current price and discount to NAV they are looking more attractive.

The MFG/NPH management fee issues which have led to MFG takeover for NPH have probably not helped perceptions of management and I suspect they are suitably embarrassed. It seems paradoxical that their investment strategy remains so clear cut and well communicated, while their business structure and various re-capitalisations seem overly complex.

Interesting that they refer to Buffett so frequently, as the name (and the style of portfolio composition referred to in their investment strategy) seem to draw more from Peter Lynch.

I like their share selections and agree they seem a good choice for those wanting to invest in the US. Perhaps we should lobby them to set up a NZ-based PIE structure fund though...:cool:

[ratkin]

I took some MFF at listing - more than I really wanted to so as to give me a worthwhile amount of MFG/MFGOA rights. Reduced the MFF post rights, as was disappointed at their decision not to hedge currency. However, at current price and discount to NAV they are looking more attractive.


The company believe that one of the reasons for the current share weakness of MFF is that people like yourself bought MFF partly to gain exposure to MFG at a discounted price. They quickly sold MFF after listing setting the tone for the shareprice.

[_Michael]

I have never really thought of investing in funds - but when Ratkin listed their holdings have thought about it in a slightly different way;

I invest directly in NYSE/Nasdaq stocks but trading fees are very high so MFF would perhaps be a good way to capture a basket of exposure to great US large caps such as JNJ , BAC and AXP both at a 25% discount to NTA and without the trading fees....

Might have to ponder this one some more!

[Huang Chung]

I see that SLM corp is 'Sally Mae'.....just one stock in a diversified portfolio, but probably not helping much at the moment.

Out of interest, Templeton Global Growth (TGG), is another Australian listed LIC specialising in overseas companies.

[ratkin]

See they have been wading into Sally Mae corp for the last few days.
Building a position at low prices. Fairly brave given the sentiment surrounding the stock , however good to see.

Sally Mae was up 12% overnight with announcement of new chairman , the highly thought of Tarracciano who has been bought in to sort out the mess

[ratkin]

Have been buying these on and off for the last six months at prices right down to the mid 50cents range.

Am very happy with the way they have handled the credit crunch , they have been buying quality and didnt panic into selling anything.

NTA is 88 cents now and price is 66c, should appreciate quickly when the aussie dollar drops

Latest investor presentation was very encouraging and well worth a read for everyone , not just holders of the stock
http://stocknessmonster.com/news-item?S=MFF&E=ASX&N=500492

[voltage]

Have I missed something. NTA 97c and price 57c, a cheap global portfolio. Why such a large discount??
Does anyone know what their management fee is?

[Lizard]

Management fee works out about 1.25% pa.

Your NTA is a little high - last week it was 71.7cps plus 9.7cps of deferred tax assets.

NTA has not moved much in recent rally, probably due to the fact they don't hedge currency movements and mostly invested in US. Not sure how accessible the Magellan Global Fund is (unlisted), but that seems to have been doing better.

I would have to say that, after following them since inception, their attempts to copy Buffett appear a little quaint. However, I'm keeping an open mind, since the pedigree behind the team who formed this is impeccable.

Recently have preferred to trade MFG - they hold a large proportion of assets in their funds, particularly MFF, so get indirect exposure. Plus they appear to be growing FUM pretty quickly and have fairly low costs given their "buy and hold" strategy. Has been in a nice uptrend of late, although I am more a seller than a buyer at this point.

[Lizard]

MFF has started firming lately on the back of rising NTA - up until recently, gains in US shares were being mostly off-set by forex.

However, MFG is still the trade here. Has taken off again past few days. FUM has risen dramatically and will be helped in small part by the rise in MFF, as will their asset backing (given their large holding in MFF). The funds management business should show a maiden profit along with an increase in the market value of their fund holdings.

The net asset value of MFG must currently be about 70cps, so at 86cps, the funds management part is only valued at about $25m for $602m of FUM at 30 Nov (up from $393m at 30 June) - just over 4% of FUM.

I have MFG in the longer term portfolio at entry 78-80cps.

[Lizard]

MFG now has FUM $845m at end of February. Net assets close to $110m at end Dec - mostly cash and holdings in own funds. Market cap $133m, so not much in it for the funds management business, despite now cashflow positive in first half, maiden profit etc, etc. In the All Ords to boot, so might get a chance at some analyst coverage.

[voltage]

any thoughts on this fund for global coverage, difficult to find info on MER and performance against an index, are you better off just holding the dow or buying afew of these companies direct?

[Lizard]

Probably a NZ holder would be better off on both tax and fees to buy a few of the companies direct (assuming have enough funds to buy 5). MFF don't seem to change their holdings particularly often, so shouldn't be too hard. Though, as per my posts above, I prefer to hold the fund manager, MFG (who also have a good % of their market cap in the funds themselves).

[ratkin]

Have I missed something. NTA 97c and price 57c, a cheap global portfolio. Why such a large discount??
Does anyone know what their management fee is?

Looks like you were not missing anything , history has shown 2009 was a great time to buy. (for those who were not too scared)
NTA now nuch closer to shareprice NTA 95C shareprice 85.5c.

Main reason for the static NTA during the last three years has been the very strong Australian dollar , now that looks easing the shareprice is starting to move,

We are pleased with our 3 core positions (high quality equities, current net cash and effective short AUD) as each has a reasonable probability of enabling value to be added in future years. Our equity positions are world class and offer quality and value in comparison with equities in general and in comparison with other asset classes. Our sizeable cash position gives us considerable flexibility to acquire more world class equities on attractive terms as stock specific and general market volatility is expected to provide opportunities. We also believe that the effectively short AUD position is more likely than not to provide material value in coming years as a combination of factors including growing uncompetitiveness which appears to have moved from the cyclical to more structural.

[Lizard]

Surprised to see we are going to start getting regular 1cps divs and a one-off issue of free out-of-the-money options at 1:3. Exercise any time till Oct 2017 at $1.05 (current share price 84.5cps). Maybe get some interest, although there has been a decline in NTA last few weeks, even as the Dow rises.

[ratkin]

Right crew i need help here.

As this thread shows i bought these up heavily during the gfc (much to the distain of P (http://www.sharetrader.co.nz/member.php?4593-Phaedrus)haedrus)
and its fair to say i have done very well out of them.

I hold both shares in MFF and the 2017 rights which expire in 2017 at 1.05 per share

Now there is a capital rising at 1.60 current price 1.83. I m wondering if it is best to

A) Just take up the 1 for 4 on the main shares and keep the rights
B) Sell the 2017 rights for around 75c each and still take the 1.60 shares
C) Turn the rights into normal shares now at 1.05 . They are then eligible to recieve 1 in 4 shares at 1.60 too.

Im thinking C as it maximises my access to the 1.60 shares. I can always sell some on market when its all completed as will have far too much money in these . They are already 15% of my portfolio and after buying rights and extra shares it will be much more

What are other holders thinking of doing?

[Snow Leopard]

...I can always sell some on market when its all completed as will have far too much money in these . They are already 15% of my portfolio and after buying rights and extra shares it will be much more...

Given that quoted part of your statement and that the 2017 options will (probably) have a slightly lower exercise price after April then I suggest that you Go option A.

Of course - the decision is entirely your own.

Best Wishes
Paper Tiger

[Lizard]

What are other holders thinking of doing?

I am still a bit puzzled as to the real reason for doing this... since there's not a huge case for "strengthening the balance sheet". So the best guess would be that they think there are going to be more opportunities coming up - and since they also recently said market valuations are stretched, then presumably they see opportunities arising as a result of a fall in prices?? But then, clearly if they believed that, it would be prudent to sell down existing investments. Which leaves their third reason of spreading investment costs over more funds... but since the fund size actually increased by over 40% in the last half and the costs don't look that high, even that doesn't seem to justify a raising.

Maybe Chris just got bored and wanted more funds to play with?

I will probably take up the rights and then sell down again at some stage, as I don't have a lot of spare cash available.

Btw, did you see that MFG are going to list the global fund, MGE... sort of their new flagship, since MFF is managed internally these days. Chris and Hamish having a bit of a competition here?

[ratkin]

Wonder if they would have given out all those free rights if they had known how well the shareprice would have performed. They now worth quite a bit.

What confuses me is that if all the rights were taken up tomorrow then the main shares would have an NTA of 1.55, makes you wonder if the new ones at 1.60 are really worth it. (apart from a quick sell). The capital raising is going to encourage many to take them up in the next week or two which will bring NTA down fairly quickly


They have done very well with their bet against the Aussie dollar, although you would have to think there not any more mileage in that one

[ratkin]

Sold the options, only because couldnt be bothered filling in a form and going through hoops paying via bpay.