ASX-listed Macquarie Group Ltd (ASX: MQG) shares were trading higher today as the broader market or ASX 200 (^AXJO) was up 1.4%.
Who is Macquarie?
Macquarie Group is Australia’s largest investment bank with operations spread throughout North America, Europe, Middle East, Asia and Australia. Unlike a traditional ‘retail’ bank, like most investment banks Macquarie makes a large chunk of its profit by operating in the investment markets and managing ‘assets’ for individuals and organisations.
Macquarie also has a very large asset leasing business (e.g. aeroplanes, cars. etc.). As of 2018, the bank had reported a profit for 49 years in a row.
2 Reasons I Can’t Fall in Love With Macquarie
Macquarie has proven itself to be a tremendously profitable bank over many years. Since the Global Financial Crisis (GFC) of 2008/2009, which saw the Macquarie share price cut by more than 50%, the bank has reinvigorated and repositioned itself as a more diverse and reliable outfit.
However, leading into 2019, there are a few reasons it’s unlikely to find its way into my portfolio.
1. Moving parts.
Macquarie is a company with many moving parts across many businesses, operating in many jurisdictions.
Combined with the uncertainty in forecasting global markets, I find it very difficult to imagine what Macquarie will look like in 5 or ten years, or even where its competitive advantage lies. The more uncertain a company’s outlook, the more compelling the valuation needs to be before I’ll buy its shares.
As a capital markets facing business, Macquarie still makes much of its money from activity in global financial markets and leasing.
While I might be guilty of ‘timing’ the market, I think there is no harm in waiting for a time when uncertainty pervades markets and shares like Macquarie — and other financials like Commonwealth Bank of Australia (ASX: CBA) and Magellan Financial Group Ltd (ASX: MFG) — get thrown out with the bath water.
Buy, Hold or Sell
Macquarie is a very profitable business which continuously surpasses my expectations. However, I struggle to get comfortable with the business and its outlook. Therefore, despite the recent share price fall and forecast 5% dividend yield, I’m happy to watch this one from the sidelines, for now.
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Disclaimer: Any information contained in this article is limited to general financial/investment advice only. The information has not taken into account your specific needs, goals or objectives, so please consider consulting a licenced and trusted adviser before acting on the information. Please read The Rask Group’s Financial Services Guide (FSG) for more information. This article is authorised by Owen Raszkiewicz of The Rask Group, which is a corporate authorised representative No. 1264179 of Strawman Pty Ltd (ACN: 610 908 211) (AFSL: 501 223).