The Magellan Financial Group Ltd (ASX: MFG) share price is outperforming the ASX 200 handsomely today. Here’s how it is managing it
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The Magellan Financial Group Ltd (ASX: MFG) share price is having a very nice day today. At the time of writing, Magellan shares are up 4.27% to $47.35 a share. That’s a significant outperformance of the broader S&P/ASX 200 Index (ASX: XJO) which is only managing a 0.68% rise today.
Magellan is now more than 10% above the 52-week low of $42 that we saw back in March. However, it is still way down from the company’s 52-week high of $66 that we saw in the middle of last year.
So why are Magellan shares performing so well today?
Well, there are a couple of recent developments that may be responsible.
Why the Magellan share price is rising today
Firstly, Magellan’s funds under management (FUM). On 7 May, the company reported its FUM for the month of April. It disclosed a total FUM of $110.43 billion, which was up significantly (4.1%) from the $106.05 billion from the previous month. Since Magellan more or less makes its crust from a percentage cut of its total FUM, more FUM means more profits for Magellan.
Secondly, Magellan co-founder and chief investment officer Hamish Douglass has been loading the boat with shares of some of Magellan’s largest funds. As my Fool colleague Mitchell Lawler discussed last week, Mr Douglass has purchased significant tranches of both the Magellan Global Trust (ASX: MGF) and the Magellan High Conviction Trust (ASX: MHH) in recent weeks. This amounted to a total of $3.19 million as of 7 May.
Mr Douglass is well-known as a skilled investor, and as such, these moves are likely to add to the perception that Magellan’s funds are a good deal right now (or at least they were a few weeks ago). Not a bad factor to have working in a share price’s favour.
Finally, yesterday Magellan released its latest performance reports for the aforementioned funds. After a couple of months of benchmark underperformance, the Magellan Global Fund managed to return 4.5% for the month of April, significantly above the 3.2% that its benchmark (MSCI World Net Total Return Index (AUD)) delivered. The Magellan high Conviction Trust isn’t benchmarked. But it still managed to do even better over April, banking a return of 4.9%.
These figures are objectively impressive and may be restoring some confidence in investors that were previously put off by the relative underperformance of these funds over the past year or so.
It’s likely to be a combination of these factors that are leading to the Magellan share price’s performance today. On current pricing, Magellan has a market capitalisation of $8.71 billion, a price-to-earnings (P/E) ratio of 21.49 and a trailing dividend yield of 4.62%.
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Motley Fool contributor Sebastian Bowen owns shares of Magellan High Conviction Trust. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.