More than just the one-time sponsor of the 2017-18 Ashes series, Magellan Financial has been one of the top performing funds to emerge from this reporting season.
Managing more than $72 billion in assets, and receiving more than $1.4 billion in net inflows in the first half of this year alone, investors are clearly backing the fund’s investment strategy.
It’s chairman and co-founder Hamish Douglass (valued at $617 million) who largely drives the fund’s investment decision.
Douglass spoke to Your Money chief business reporter Leo Shanahan about his outlook for 2019.
On his top stocks
Douglass said that while the depreciating Australian dollar had helped boost returns from international equities, there had been some standout performers in the last six months of 2018.
“Some individual stocks performed fairly strongly… Starbucks has done very well [~40%]. Microsoft held up well. HCA, the largest hospital provider in America, did very well [~22%].”
On the trade war
Having trimmed its holding in Apple earlier in the year, Douglass said Magellan had tried to limit its exposure to the ongoing trade dispute between the US and China.
“Overall we’re not overly worried of the outcome of the trade dispute,” Douglass said. “Apple could get affected but it’s one stock out of 21 stocks in the portfolio.”
Similarly, Starbucks and Yum Brands, which owns KFC in China, could feel the effects of a fallout between the two countries although Magellan maintains its stakes in those.
Unlike Apple, it is regulation and privacy concerns that continues to threaten Facebook, although Douglass believes this has been overplayed.
“[In Europe] there’s something called the GDPR, the General Data Protection Regulation, that went through last year. It has actually had almost no impact on user growth or engagement in Europe yet it is probably the most comprehensive privacy law the internet companies have ever faced,” Douglass explained.
“The bigger issue for Facebook is actually the whole spreading of fake news and how much they can get ahead of it by investing in checkers and artificial intelligence… we’re watching that very carefully.”
However, he believes that the company is doing enough and still is an impressive business.
“On the face of it, Facebook has one of the best business models the world has ever seen so we weigh up those risks.”
On volatility and interest rates
After the Federal Reserve backed down from raising interest rates in the US, central banks around the world appear on hold which places investors at an “unprecedented point in history”, according to Douglass.
“I think you’d very ill-advised to think this calm that we suddenly have and this market rally that we’ve had in the first few months of this year is an indication that we’re in clear waters,” he warned.
“I think people should have some caution at the moment.”
Watch the full interview with Hamish Douglass above.