Macquarie Group
Recommendation
Macquarie Group’s share price has rebounded 40% since the low of $19.94 on 26 Sep 2011, and the company is now more rationally valued given the quality of its business. Buying at today’s price requires faith that eventually Macquarie’s market facing divisions will produce significantly higher profits than those expected when the company announces its full year result on 27 April.
The range of outcomes from here is still wide. While we believe that Macquarie is worth more than its current market value, the reduced margin of safety means we’re getting closer to downgrading to Hold. If Macquarie has become more than 5% of your portfolio, you might consider selling some shares despite the current positive recommendation (see The buy and sell strategy).
Over the next fortnight you will be able to read a two-part series that pitches Macquarie against US rival Goldman Sachs. Goldman is never out of the headlines for long these days, but it is still widely considered the best operator in the industry. Macquarie’s international expansion means the two will butt heads more than ever before. With Macquarie’s share price increasing 4% since Macquarie Group: An odd conundrum from 8 Feb 12 (Long Term Buy – $26.84), we’re sticking with LONG TERM BUY.
Note: The model Growth portfolio owns shares in Macquarie Group.