Australia’s economic growth is vastly outpacing its wealthy global counterparts, with the economy set to grow at its fastest rate since 2007 this year, and Australian consumer confidence hitting decade-highs.

Westbank Banking Corp (ASX: WBC) has just released its Westpac-Melbourne Institute Index of Consumer Sentiment report, which tracks Australian consumer confidence and spending habits.

It shows consumer confidence increased by 6.2% to 118.8 in April from 111.8 in March, which Westpac’s Chief Economist Bill Evans calls “an extraordinary result”. 

Australians confident and eager to spend

Evans outlined that Westpac’s confidence index is now at its highest level since August 2010 when Australia’s post-GFC rebound and mining boom were in full swing.

Expectations for the economy are also up strongly and back near those 2009-10 record levels. The ‘economy next 12 months’ sub-index is up 10.3% and the ‘economy next 5 years’ sub-index is up 4.1%.

Westpac’s index tracks several sub-indexes that track confidence in various industries and also specify consumer confidence on various spending habits.

The industry breakdown shows those employed in the ‘recreational services’ and hospitality industries showed very big sentiment gains, up 23% and 14% respectively. There were also big sentiment gains among those working in construction (+17.3%), including tradies (+18.5%) and labourers (+14.6%).

Evans’ report also highlights the strong housing market “more generally, is also likely to be boosting confidence.” Auction clearance rates are near 80% and dwelling prices have lifted by 5.8% nationally since the beginning of the year.

Westpac’s view on potential interest rate rises

Evans also speculated on why the Reserve Bank may be hesitant to raise interest rates, despite Australia’s strong economic performance.

When the Index was last at these levels, in August 2010, the Reserve Bank had increased the cash rate by 150 basis points to 4.5% from its GFC low of 3% in September 2009. That sharp increase in rates is likely to have contributed to the Index falling 25% over the following year.

No doubt the Reserve Bank will be aware of that period and continue to tread carefully with the cash rate.

Caution for overly optimistic expectations

While on the surface, Westpac’s consumer confidence index is cause for some celebration, Evans also noted areas for caution heading forward.

He noted that confidence in the jobs market appears to have plateaued. Westpac’s survey also includes important insights into the shape of the recovery. Housing affordability appears to be weighing on homebuyer sentiment, with house price growth hitting 32-year highs. 

Big-ticket item spending intentions – where the index asks consumers how confident they are in making large household purchases – are not nearly as buoyant as the overall index (down more than 2% against the last quarter).

More reading

• Treasurer outlines federal budget focus as IMF upgrades Australian outlook
• NAB (ASX:NAB) share price falling on credit restriction calls
• The Westpac (ASX:WBC) share price is the best performing of the big four banks in 2021
• ASX 200 Weekly Wrap: ASX 200 hits new post-COVID high
• Which big 4 ASX bank is going to pay the biggest dividend in FY21?

Motley Fool contributor Lucas Radbourne-Pugh has no position in any of the stocks mentioned. 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.

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Treasurer Josh Frydenburg has outlined the government’s focus for the upcoming federal budget. This comes amid a stronger-than-expected economic recovery following the COVID-19 pandemic. 

The S&P/ASX All Ordinaries Index (ASX: XAO) is up 5% in 2021 and Australia’s unemployment rate has fallen to 5.6%. This has led the IMF to upgrade its outlook for Australian economic growth to 4.5% this year. It also lists expected inflation at 1.7%. 

The ABS data showed Australia’s workforce participation rate increased to 66.3%, while overall employment increased to 13,077,600. Unemployment, which has long been a dragging force on wage growth, also decreased to 7.9%.

What to expect from the federal budget

The ramifications of finishing the government’s JobKeeper wage subsidy scheme on 28 March are still to be seen. However, Australia’s economic recovery has exceeded all expectations.

The Government is expected to use Australia’s strong economic performance and record-low global interest rates to continue funding increases to skills acquisition and job creation programs.

It plans to lower taxes by over $50 billion over the forward estimates, including by $9 billion in 2020‑21 and $32 billion in 2021‑22. The government also recently extended its $4 billion JobMaker hiring credit program, as Australia’s real GDP levels exceeded pre-pandemic levels.

Frydenberg also acknowledged increased funding for the aged care sector after a royal commission found extensive problems in access, transparency and training across the industry.

Frydenberg said on 3AW radio:

In this budget, we will have an emphasis on skills, on meeting the workforce shortages, age care is going to be a major feature as well

We are going to focus on the essential services that we can guarantee as well as maintain the wonderful momentum in the jobs market.

The federal budget is likely to be introduced next month.

ASX benefits from Australia’s economic recovery

Some of the ASX’s biggest companies have profited from favourable economic conditions. High iron-ore prices have been benefitting Australia’s largest mining shares. Furthermore, the BHP Group Ltd (ASX: BHP) share price up 11.5% in 2021.

Meanwhile, a record housing boom has led to strong growth in banking shares. Big-four leading Westpac Banking Corp‘s (ASX: WBC) share price up by 30% in 2021 so far.

However, as the global economy is expected to enter a period of normalisation, the IMF expects Australia’s real GDP growth to slow to 2.3% by 2023.

The S&P/ASX 200 Index (ASX: XJO) is falling by 25 points today but is up more than 5% in 2021.

More reading

• Westpac (ASX:WBC) reports ‘extraordinary’ Australian consumer confidence
• NAB (ASX:NAB) share price falling on credit restriction calls
• ASX miners in focus as the copper price looks poised to crack above 10-year highs
• The Westpac (ASX:WBC) share price is the best performing of the big four banks in 2021
• Airbnb predicts huge rebound, ASX travel shares in the hot seat

Motley Fool contributor Lucas Radbourne-Pugh has no position in any of the stocks mentioned. 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.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Cathie Wood, the CEO of ARK Invest, is known for finding hypergrowth names with upside potential. The three largest holdings in ARK’s six actively managed funds are Tesla, Square, and Teladoc. None of the three is cheap by traditional valuation metrics like price to sales (P/S) or price to earnings (P/E). But ARK believes that these companies, and others like them, will lead to a doubling of U.S. GDP to $40 trillion by 2035. 

By contrast, The Dow Jones Industrial Average (DJIA) will celebrate its 125^th anniversary on May 26. But while it’s meant to reflect the entire U.S. economy, it doesn’t exactly conjure an image of growth. In fact, the Nasdaq has given investors twice the return of the DJIA over the last five years.

Surprisingly, the four DJIA components that ARK owns — Apple (NASDAQ: AAPL), Caterpillar (NYSE: CAT), Boeing (NYSE: BA), and Honeywell (NYSE: HON) — are all relatively stable companies with histories of earnings growth, rather than up-and-coming rising stars. Here’s why Cathie Wood likes these four Dow stocks, along with some surprising reasons she doesn’t like a few others. 

1. Apple: $79.6 million

The ARK Fintech Innovation ETF (NYSEMKT: ARKF) owns 606,427 shares of Apple, which is worth nearly $80 million as of Apple’s closing price on April 12. While this may sound like a lot, Apple is the fund’s 24^th-largest holding and comprises less than 2% of its total value. ARK is a firm believer in mobile technology’s increasing role in commerce, repeatedly noting the success of China’s mobile payment system, so Apple’s fintech developments like the Apple Card and Apple Pay make it a natural fit in ARK’s Fintech ETF.

Augmented Reality (AR) is one of ARK’s most closely followed trends. In its Big Ideas 2021 presentation, ARK called out Snapchat, Facebook, and Apple for increasing their investments in AR (all three companies are held in the Fintech Innovation ETF). ARK also supports Apple’s decision to transition Macs to ARM processors. ARK believes ARM could become the new processor standard by 2030, displacing Intel and leading to further domination by AMD and NVIDIA. 

AAPL Total Return Level data by YCharts

2. Caterpillar: $75.6 million

Earth moving equipment manufacturer Caterpillar is the 15^th-largest holding in the ARK Autonomous Technology & Robotics ETF (NYSEMKT: ARKQ). After a strong market-beating year in 2020, shares of Caterpillar are currently right around their all-time high. In fact, Caterpillar is up over 25% so far in 2021, making it one of the best-performing stocks in the DJIA.

Caterpillar is an international company that generates over half its sales from outside the U.S. Global competition in the construction, mining, and energy industries is fierce, especially in China — which is Caterpillar’s hottest market. To stay ahead, Caterpillar is implementing machine learning and big data to help its customers better manage their fleets. Caterpillar has developed tools like Cat Connect and Cat Digital, which can be used for both existing and new equipment. 

3. Boeing: $22.5 million

Boeing is the 11^th-largest holding in the newly launched ARK Space Exploration & Innovation ETF (NYSEMKT: ARKX). As the world’s second-largest maker of commercial airplanes and a leading aerospace company, Boeing has a clear role to play in the burgeoning space industry. Boeing’s Defense, Space, and Security segment is a prime contractor for NASA’s Space Launch System, a heavy-lift rocket for human space exploration. Boeing also builds satellites and software systems for commercial, military, and scientific exploration. 

4. Honeywell: $7.4 million

Honeywell is a minor holding, ranking 28^th in ARK’s Space ETF. Honeywell manufactures and designs components for the commercial airline industry and the defense industry. However, its strides in the industrial internet of things (IIOT), which involves developing operational technology (OT) for industrial equipment, are right up ARK’s alley. Honeywell would fit nicely into the ARK Innovation ETF (NYSEMKT: ARKK), the largest of its actively managed ETFs. But because the fund is centered almost entirely around tech stocks, that’s unlikely to happen anytime soon.

Surprising Dow stocks ARK doesn’t own

ARK’s tech-centered focus may lead investors to assume it owns Salesforce and Microsoft, which are both Dow stocks. But it doesn’t. The ARK Next Generation Internet ETF (NYSEMKT: ARKW) holds 53 securities, but not Verizon. And while five out of the DJIA’s 30 components are financial companies, Ark’s fintech fund holds none of them. Finally, the ARK Genomic Revolution Multi Sector ETF (NYSEMKT: ARKG) is focused heavily on healthcare, yet holds none of the DJIA’s five healthcare stocks. 

Takeaways

Industrial stocks aren’t often thought of as the most exciting sector on Wall Street. However, leading dividend-paying industrial stocks with growth potential have been handsomely rewarding investors for decades. Cathie Wood and her team think a handful of these names have bright futures in emerging industries. Honeywell and Caterpillar, in particular, stand out as two top-tier companies poised to raise their dividends and beat the market over the long term.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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• Tesla and GameStop were some of the most popular US shares last week

Daniel Foelber has no position in any of the stocks mentioned. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, 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. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Apple, Facebook, Microsoft, NVIDIA, Salesforce.com, Square, Teladoc Health, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. recommends Intel and Verizon Communications and recommends the following options: long January 2023 $57 calls on Intel, short March 2023 $130 calls on Apple, short January 2023 $57 puts on Intel, and long March 2023 $120 calls on Apple. The Motley Fool Australia has recommended Apple, Facebook, and NVIDIA. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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New Zealand-based diversified energy provider, Genesis Energy Ltd (ASX: GNE) has failed to get its share price to rally after releasing its third-quarter performance report. At the time of writing, the Genesis Energy share price is down 0.31% to $3.19.

A mixed bag of results has been met with a mixed reception from investors. Let’s take a look over what the energy provider released today.

Customers dwindle

The Genesis Energy share price is on the slide today after the company advised its total customers declined, despite a 20% surge in total energy generation compared to last year. With a 2.4% fall, total customers took a step backwards from 486,338 to 474,702 by the end of the March quarter.

The issue stems from a high net customer churn rate of 15.2% on a 3-month rolling average. Genesis has been taking steps to try to reduce this by building customer engagement.

One such initiative has been the company’s ‘Power Shout hours’, which offers free energy from its rewards program. Genesis gave its customers over 1.2 million Power Shout hours over the quarter. Management believes this was responsible for the 19% increase in the company’s interaction net promoter score.

In addition, the re-platforming of Genesis Energy’s sales, service, and billing technologies is on course as planned. A decision is expected to be made by the end of FY21 from the company’s shortlist of potential suppliers.

Gas and oil out of favour

Although Genesis’ total energy generation was comprised of 31% gas, volumes fell drastically during the quarter. The retail segment of the business recorded a 20% fall in total LPG sales volumes. Meanwhile, gas generation for the wholesale segment declined 25% to 605 GWh.

At the same time, the Kupe oil and gas field continues to undergo strategic review. The company noted strong interest from potential buyers for Genesis’ stake. Coincidentally, The Australian Financial Review recently reported on natural gas beginning to get a bad rap with emission-conscious investors.

On a positive note, Genesis Energy’s renewable generation increased by 15% to 487 GWh – demonstrating the energy provider’s green shift.

Genesis share price snapshot

The Genesis share price has been trending upwards, returning 16% in the past 12 months. However, this is still an underperformance compared to the S&P/ASX 200 Index (ASX: XJO), which has increased by around 31% over the last year. 

Despite the slowdown in customer growth, Genesis shares are still trading at a price-to-earnings (P/E) ratio of 38.9. 

More reading

• Brokers weigh in on Galaxy (ASX:GXY) and Orocobre (ASX:ORE) merger
• Why the Bank of Queensland (ASX:BOQ) share price is charging higher today
• Afterpay (ASX:APT) share price: Is a US listing a game changer?
• Why the Sydney Airport (ASX:SYD) share price is trading lower today
• Hub24 (ASX:HUB) share price slides despite record growth

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. 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.

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ASX lithium heavyweights Galaxy Resources Limited (ASX: GXY) and Orocobre Limited (ASX: ORE) are the latest ASX mining shares to join hands and emerge as a global mining heavyweight. 

Under the Scheme of Arrangement, Orocobre will acquire 100% of the shares in Galaxy. The combined group will create the fifth-largest global lithium chemicals company. 

This follows the Northern Star Resources Ltd (ASX: NST) and Saracen Mineral Holdings (ASX: SAR) merger which saw the combined group climb the rankings to emerge as a global top 10 gold producer.

Big brokers have digested yesterday’s news and provide their opinions below. 

Brokers weigh in on the Galaxy and Orocobre merger 

Brokers are largely positive about the merger. However, they are reserved with their new share price targets. And understandably so, with the Galaxy and Orocobre share prices surging a respective 380% and 205% in the past 12-months. 

Citi has observed the many benefits of the board-endorsed $4 billion merger. This includes scale benefits on operations, the marketing potential on improved product mix, and lower corporate overheads. The broker is still waiting for the company to quantify these synergies. For the time being, it assumes that the ‘MergeCo’ could be 5-12% earnings per share accretive in FY22 and FY23.  

Citi is ‘buy’ rated on Ocorobre shares with a $6.75 target price. 

Similarly, Macquarie believes the merged entity will provide synergies and accelerate the development of Argentinian operations. The combined group would also form a stronger base to fund its growth projects. 

Macquarie rates Orocobre shares as an ‘outperform’ with a $7.10 target price. 

Morgan Stanley was the only broker to have a negative target price despite its positive commentary. The broker believes the merger would “benefit both parties via scale, balance sheet capacity, and the ability to better sequence growth projects”. 

Despite having nothing negative to say about the merger, it was ‘equal-weighted’ on Orocobre shares with a target price of just $4.35. 

Orocobre shares have run more than 30% in April and currently fetching $6.53. While Galaxy shares have run more than 40% to $3.84. 

More reading

• ASX miners in focus as the copper price looks poised to crack above 10-year highs
• 5 things to watch on the ASX 200 on Tuesday
• Why Eagers Auto, Orocobre, Sims, & Titomic shares are storming higher
• Galaxy Resources (ASX:GXY) share price jumps on merger news
• Galaxy (ASX:GXY) and Orocobre (ASX:ORE) announce mega lithium merger

Motley Fool contributor Kerry Sun has no position in any of the stocks mentioned. 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.

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The Bank of Queensland Limited (ASX: BOQ) share price has been a positive performer on Tuesday.

In afternoon trade, the regional bank’s shares are up over 2% to $9.11.

This compares to a 0.35% decline by the S&P/ASX 200 Index (ASX: XJO).

Why is the Bank of Queensland share price pushing higher today?

There have been a couple of catalysts for the solid performance by the Bank of Queensland share price on Tuesday.

One of those was the release of an announcement clarifying an aspect of its recent half year results release.

According to the release, the bank has amended its earnings per share and weighted average number of shares figures in accordance with AASB 133.

This has resulted in earnings per share increasing slightly from what it reported with its results earlier this month. Though, it is important to note that there is no change in respect to growth rates between the first half and the prior corresponding period.

Diluted earnings per share for the first half is now 32.8 cents per share. This is up 4% on the prior corresponding period and 120% on the second half of FY 2020. This compares to the 31.8 cents per share reported previously.

What else is supporting its shares?

Also giving the Bank of Queensland share price a boost today was a broker note out of Morgan Stanley.

According to the note, the broker has upgraded the bank’s shares to an overweight rating with an improved price target of $10.00.

This price target implies potential upside of approximately 10% for its shares over the next 12 months excluding dividends.

Morgan Stanley was pleased with the bank’s performance in the first half and expects more of the same in the second half. And while it doesn’t expect the acquisition of ME Bank to necessarily boost its growth prospects, it sees positives from scale benefits and geographic diversification.

More reading

• Top brokers name 3 ASX shares to buy next week
• Is the Bank of Queensland (ASX:BOQ) share price great value?
• 5 things to watch on the ASX 200 on Friday
• ASX 200 rises, Zip sinks, BOQ reports
• ASX 200 flat: Zip raises $400m, Bank of Queensland results, Regis crashes

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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.

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The Afterpay Ltd (ASX: APT) share price has been an interesting performer today. Afterpay shares opened a substantial 2.4% higher this morning at $129.09 a share, only to rapidly give up those gains soon after. At the time of writing, Afterpay shares are $126.02, down 0.14% for the day.

Even so, that share price still leaves the buy now, pay later (BNPL) pioneer more than 24% higher in April so far.

So why did Afterpay shares spike this morning? Well, as we covered earlier today, the company released an impressive update for the quarter ending 31 March 2021. Afterpay reported sales growth of 123% over the quarter, including an eye-watering 2,211% jump in US sales. active customer numbers also rose 75% to 14.6 million.

However, one of the biggest announcement had nothing to do with growth numbers at all. Afterpay is now considering a listing on the US markets. Here’s some of what the company had to say on the matter:

Afterpay is currently working with external advisors to explore options for a US listing given the US market is now the largest contributor to our business and is expected to continue to grow strongly... While Afterpay intends to remain an Australian headquartered company, our shareholder base is increasingly becoming more globally focused. A US listing would further accommodate this growing interest.

Are Afterpay shares coming to America?

So will a US listing, if it does indeed occur, boost the Afterpay share price to new heights?

Well, there’s a good chance it will, at least temporarily. The ASX is a relative minnow compared to the whale that is the American market. According to the ASX, the Australian share market has a rough market capitalisation of $2.31 trillion (US$1.8 trillion), as of 31 March 2021. By comparison, a report from Siblis Research estimates the market cap of the combined US markets at US$49.11 trillion ($63.07 trillion).

In other words, there’s a lot more money sloshing around across the Pacific than on the ASX. It’s conceivable that a hip, trendy company like Afterpay would find some considerable interest in the US markets. Especially considering its healthy US expansion.

Now, this might not be as much of a gamechanger as it initially might seem. As an ASX 20 company, Afterpay has long reached the size where it would be on the radar of US fund managers. Especially considering its inclusion in the MSCI Australia Index last year.

Nevertheless, it’s hard to see a US listing being detrimental to Afterpay’s share price. Perhaps Afterpay will join that other emblem of Aussie tech – Atlassian Corporation (NASDAQ: TEAM) – in showcasing what kind of tech companies Australia can produce on the world’s largest market. We’ll have to wait and see, so watch this space!

More reading

• ASX 200 down 0.4%: Afterpay delivers stellar Q3 growth, Rio Tinto Q1 update
• Declining birth rates could threaten the A2 Milk (ASX:A2M) share price
• This major US bank has bought 6% of Zip (ASX:Z1P) shares
• Why the Afterpay (ASX:APT) share price is in focus
• 5 things to watch on the ASX 200 on Tuesday

Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends Atlassian. The Motley Fool Australia owns shares of AFTERPAY T FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Sydney Airport Holdings Pty Ltd (ASX: SYD) share price is trading lower on Tuesday afternoon.

At the time of writing, the airport operator’s shares are down 2% to $6.02.

Why is the Sydney Airport share price trading lower today?

Investors have been selling Sydney Airport’s shares following the release of its latest update on passenger numbers.

According to the release, total passenger traffic in March 2021 was 1,153,000 passengers. This is down 42.6% on the prior corresponding period in 2020 and 68.4% on the corresponding period in 2019.

As you would expect, almost all of these passengers are passing through its domestic gates.

During the month, domestic passengers totalled 1,120,000. While this was down only 15.1% on March 2020’s numbers, it is still down a meaningful 52% on the same period in 2019 before COVID-19 was a thing.

In respect to international travel, a total of 33,000 international passengers passed through Sydney Airport in March. This was down a massive 95.2% on the prior corresponding period and 97.5% on the corresponding period in 2019.

Once again, management has warned that the downturn in international passenger traffic is expected to persist until government travel restrictions are eased. Though, it will be given a boost from the opening of the trans-Tasman travel bubble this week.

Credit Suisse estimates that this route was responsible for 7% of total passenger traffic and 18% of international passenger traffic prior to the pandemic.

Is the Sydney Airport share price in the buy zone?

According to a note out of Credit Suisse this morning, its analysts have retained their underperform rating but lifted their price target to $5.30. This price target implies potential downside of almost 12% over the next 12 months.

However, one broker that is a lot more positive on Sydney Airport share price is Goldman Sachs.

Earlier this month the broker retained its buy rating and $6.73 price target on its shares. This implies potential upside of 12% for its shares over the next 12 months.

And rounding things off, analysts at Macquarie are sitting on the fence with their neutral rating and $6.32 price target.

More reading

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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.

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The Hub24 Ltd (ASX: HUB) share price started the day in the green but has since slumped. At the time of writing, shares in the fintech company are trading at $23.97 – down 1.28%.

Today’s share price movement comes following the company’s release of its FY21 third quarter (Q3) results. For context, the S&P/ASX 200 Index (ASX: XJO) is also trading lower, down 0.36%.

Let’s take a closer look at today’s announcement.

Hub24 share price rollercoaster

The Hub 24 share price is on a wild ride today despite the company announcing a 41% increase in net cash inflows on the prior corresponding period (pcp) to $1.9 billion. During all of FY21, the average monthly net inflows were $556 million, up 35% on FY20’s monthly average.

The company advised it now manages $51.4 billion worth of funds – up 236.7% on the pcp. This includes $17.2 billion brought in by Xplore Wealth, which Hub24 acquired during the quarter. Platform funds under administration ($35.6 billion) were up 136% on the pcp. The remaining $15.8 billion of funds was via portfolio, administration and reporting services. 

According to Hub24, from December 2019 to now, its market share has increased from 1.75% to 2.5%. Including Xplore Wealth, the company’s total market share is 4.3%.

Other updates

Hub24 also confirmed it now owns one-third of all shares in Easton Investments Ltd (ASX: EAS). Hub24 will now share its HUBconnect Insight compliance monitoring software with Easton.

As well, the company plans to launch its investment and superannuation offering with IOOF Holdings Limited (ASX: IFL) in the last quarter of FY21. Hub24 is also collaborating with Aberdeen Standard Investments Australia Limited on a “bionic advice solution”. Hub24 hopes the new offering will facilitate the entering of new customer segments.

Finally, the Clearview Wealth Ltd (ASX: CVW) “bulk transaction” (approximately $1.3 billion) is also expected to be completed in the last quarter of this financial year.

Investors will likely be keeping an eye on the company’s expansion plans to see whether they translate to growth in the Hub24 share price.

Hub24 share price snapshot

Over the past 12 months, the Hub24 share price has appreciated by around 145%. The share price is, however, around 11% lower than it was in mid-February this year.

Shares in the company went from $26.86 on 15 February to bottom out at $19.48 by 5 March. A swift recovery (the Hub24 share price closed at $25.45 on 17 March) was followed by another fall. By 30 March, shares were valued at $19.89 each. Since then, the company’s value has recovered to its current level.

Hub24 has a market capitalisation of $1.7 billion.

More reading

• Why brokers think these 3 top performing ASX 200 shares can beat the market
• 2 ASX tech shares rated as buys by brokers
• Top brokers name 3 ASX shares to buy today
• These were the worst performers on the ASX 200 last week
• Top broker urging investors to take profit now on this outperforming ASX share

Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Hub24 Ltd. The Motley Fool Australia has recommended Hub24 Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Magellan Financial Group Ltd (ASX: MFG) was once considered one of the best ASX 200 growth shares out there. Investors enjoyed an incredible run up between January 2019 and February 2020. Over that short period, Magellan shares went from just under $23 a share to well over $73 – a gain of 222% in just 13 months.

But Magellan has not recovered nearly as well from the coronavirus pandemic as the S&P/ASx 200 Index (ASX: XJO) has since. As it stands today (at the time of writing), Magelang shares are trading for $47.58. That’s a good 35% off of those February 2020 highs, and more than 27% below what the company was trading for back in August last year.

The Magellan share price seems to be going sideways.

So what happened to this ASX share? Magellan used to be loved for its leveraged exposure to the ASX and the US markets, considering its funds’ management nature.

Fund managers are actually a relatively simple business to understand. They make money in two ways – by increasing funds under management (FUM) and by delivering market performance, preferably outperformance.

Let’s look at Magellan’s FUM first then.

Fee fi fo FUM

Magellan’s FUM has remained remarkably consistent over the past 18 months. Back in February 2020, Magellan told the markets that, as of 31 January 2020, it had $104.31 billion in FUM. As we discussed last week, Magellan reported FUM of $106.05 billion in FUM as of 31 March 2021. That’s a pretty solid, if not overly inspiring, comparison there. It indicates that Magellan’s investors hed their faith in the company’s funds over the significant market volatility and turmoil we saw last year.

So let’s now turn to the performance of Magellan’s funds themselves to see how they measure up. This company has long been able to attract investors with its focus on the US markets. And its ability to deliver market-beating returns, of course.

What about Magellan’s returns?

So, let’s first look at Magellan’s flagship Global Fund, of which there is a listed version in the Magellan Global Fund (ASX: MGF). According to Magellan, the Global Fund has returned 4.52% over the past 12 months (as of 31 March 2021) after fees. It has averaged 13% per annum over the past 3 years, 12.57% per annum over the past 5 and 15.88% over the past 10.

By comparison, the MSCI World Net Total Return Index (AUD), which is the benchmark Magellan follows, has delivered 23.78% over the 12 months, 13.08% per annum over the past 3 years, 13.58% over the past 5, and 12.85% over the past 10.

In other words, the Magellan Global Fund has mirrored or underperformed its index. The past year has been especially damaging to the company’s longer-term performance metrics, given that 13%+ underperformance.

Magellan’s High Conviction strategy, used in both a managed fund and its listed equivalent, the Magellan High Conviction Trust (ASX: MHH), has not fared much better. It has delivered 13.18% over the past year (again, as of 31 March). But 11.04% on average over 3 years, and 12.08% over the past 5.

By comparison, investing in a simple S&P 500 Index (INDEXSP: .INX) fund, like the iShares S&P 500 ETF (ASX: IVV), would have gotten an investor 25.4% over the past year, 16.7% per annum over the past 3 years, 16.3% over 5, and 17.3% over 10.

Plus, this exchange-traded fund (ETF) charges a management fee of just 0.04%. Compare that with Magellan Global Fund’s 1.35% fee, or the High Conviction fee of 1.5%.

Investors don’t usually like paying large management fees if the fund in question doesn’t justify said fee through index outperformance. This is likely to be what is weighing on the Magellan share price over the past few months.

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Motley Fool contributor Sebastian Bowen owns shares of Magellan High Conviction Trust. The Motley Fool Australia has recommended iShares Trust – iShares Core S&P 500 ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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