Magellan’s Douglass names his top shares for an uncertain world

As the wealthiest fund manager in Australia, Magellan Financial Group Ltd‘s (ASX: MFG) Hamish Douglass is someone that a lot of investors have time for. And for good reasons too. Magellan has grown to be the largest fund manager in Australia with $95.5 billion in funds under management as of 30 June.

Magellan’s flagship Global Fund (unlisted) has delivered its investors an average of 15.77% per annum over the past 10 years (after fees), which is an exceptional result that most ASX fundies would find out of reach. The Magellan Global Fund has an ASX-listed quasi-equivalent in the Magellan Global Equities Fund (ASX: MGE).

What shares has Magellan been buying?

Magellan has recently disclosed the total holdings of its funds for the end of the financial year. It makes some interesting reading.

For its Global Fund and Global Equities fund, the top 10 shares held are as follows:

1. Microsoft Corporation
2. Tencent Holdings
3. Alibaba Group
4. Alphabet
5. Facebook
6. Reckitt Benckiser Group
7. Starbucks Corporation
8. Novartis AG
9. Crown Castle International Corporation
10. SAP SE

The portfolio’s cash position is sitting at 15% as of 30 June.

For Magellan’s High Conviction Trust, which is an unlisted fund that offers a high conviction, high concentration strategy with ‘8-12 of Magellan’s best ideas’, the holdings are as follows:

1. Microsoft Corporation
2. Alibaba Group
3. Tencent Holdings
4. Alphabet
5. Facebook
6. Starbucks Corporation
7. SAP SE
8. Visa
9. Estee Lauder

The portfolio’s cash position is sitting at 22% as of 30 June.

Magellan also offers an ASX-listed version of this fund as well – the Magellan High Conviction Trust (ASX: MHH).

How is Magellan investing in this uncertain world?

In an interview with the Australian Financial Review (AFR), Hamish Douglass also discusses his conflicting ‘visions for the future’. Douglass told the AFR that he can see 2 possible scenarios for the future of global markets. One is where the world “gets on top of the pandemic”, fiscal and monetary support continue and economies reopen.

The other (you might have guessed already) is a little direr. It involves an uncontained coronavirus with waves of infection and rolling shutdowns and lockdowns, which would, of course, be a terrible development for global markets. Douglass isn’t willing to bet one way or the other but sees both as definite possibilities.

It’s through this prism that we should analyse Magellan’s current portfolio holdings. Douglass tells the AFR that his management team has already removed companies that would be heavily affected by the second scenario. Even though he loves the business models of LVMH (owner of luxury brands like Luis Vitton), brewers Heineken and Anheuser-Busch InBev, and US-based private hospital operator HCA, Douglass sees too mich risk facing these companies to justify an investment in the current environment.

But longtime cornerstone shares like Tencent, Alphabet, and Microsoft remain as they look set to thrive in either scenario.

Foolish takeaway

Even though Douglass and Magellan don’t really invest in ASX-listed shares, I think all Aussie investors would benefit from taking a look at this reputable fund manager’s moves and market outlook. Douglass has got to the position he is in today by getting enough calls right, after all.

More reading

• My ASX share for the week
• 2 easy ASX shares for beginners
• The Afterpay share price among ASX stocks hit by a broker downgrade today
• Why Afterpay, Alumina, Magellan, & Webjet shares are dropping lower
• ASX 200 drops on return of lockdown in Melbourne

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Sebastian Bowen owns shares of Alphabet (A shares), Facebook, and Magellan High Conviction Trust. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares) and Facebook. The Motley Fool Australia has recommended Alphabet (A shares) and Facebook. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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