Turnaround time at Magellan

The first article I wrote in 2023 was titled “Is the pessimism engulfing Magellan overdone?” Two years later, and with the benefit of hindsight, the answer to that question was probably ‘yes’ although the premise was reached a bit prematurely. At the time the share price was $8.73 having plunged from its high above $72 in February 2020. It continued to slide, reaching a low point of $6.22 in October 2023, a total fall of 91%.

Many investors (self included) were badly burnt during this fall from grace. The tendency is to then think ‘I will never touch that stock again.’ But this inbuilt bias may blind us to the potential future opportunities. The reality is the Magellan of today is a very different business to the Magellan of old.

Hamish Douglass used to shun turnarounds, preferring to invest in strongly performing business rather than take the risk of investing in a turnaround, which, as he put it, often fail to turn. Now the business he founded is in the midst of a turnaround with a whole new team at the helm.

The strategy at Magellan Financial (ASX:MFG) has undergone major changes, but it is still...