Macquarie Group
Recommendation
The share prices of many large financial institutions around the world have increased significantly since July when European Central Bank chief Mario Draghi promised to do 'whatever it takes' (read print huge quantities of Euros) to save the Euro. Macquarie Group's share price has reached its highest point since June 2011 via a low of $20.03 set on 26 Sep 2011. Not much has changed for the business during this period, with the company's market facing businesses struggling to produce a profit. Still, at least chief executive Nicholas Moore is belatedly cutting staff to a more reasonable level to help boost return on equity in the face of weak corporate activity, low interest rates and higher regulatory capital requirements.
Macquarie should be capable of producing much higher profits when the global economy eventually recovers and it remains a key shareholding in the model Growth portfolio (we reduced the stake by 1% on 10 Oct 12 (Hold – $29.17) to keep below the recommended portfolio limit of 5%). Given that it also still trades at a small discount to book value, we're increasing the prices in the recommendation guide and sticking with the portfolio limit of 5%. HOLD.
Note: The model Growth portfolio owns Macquarie Group shares.