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What are top-rated global equity managers holding?

Lewis Jackson  |  15 Sep 2021Text size  Decrease  Increase  |  
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Yesterday we looked at the most undervalued global stocks within Morningstar coverage. Today we dive into the portfolios of our favourite global equity managers to see what they own and how they’ve performed.

Magellan Open Class, Capital Group New Perspective, and Dimensional Global Large Company Trust are all gold-rated global equity funds. Morningstar’s analysts like how they invest and tip them to outperform over the long-term.

The funds are all large cap investment managers that Morningstar classifies as “blend”, meaning they have neither a growth nor a value bias.

Fund managers often disclose their holdings on a delayed basis and stock prices can change in the interim. They may also elect to disclose their top holdings, rather than the entire portfolio. Investors need to do their own due diligence. To help, we’ve included information about their holdings.

Strong backers of US tech

Global equity managers are backing stocks with economic-moats and the US technology sector.

Across each portfolio’s top ten holdings, 80% to 90% of the stocks have wide moats. Two thirds of Magellan’s portfolio are wide-moat names.

Each fund brings their own twist to US tech. All three own sizable chunks of Microsoft (MSFT), Facebook (FB) and Alphabet (GOOG). Dimensional and Capital Group own Amazon.com (AMZN).

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Apple (AAPL) is Dimensional’s largest holding and is absent from the other managers. Capital Group’s largest holding is Tesla (TSLA), which makes up 0.6% of Dimensional and is absent from Magellan.

Of the three, Magellan is most exposed to US tech giants, with 21% of the portfolio across giants Microsoft, Facebook, and Alphabet.

All three companies are trading in a range Morningstar considers fairly valued. Amazon.com closed Tuesday at $US3,450, an 18% discount to the fair value of US$4,200.

Outside US tech, payments giant Visa (V), bank JPMorgan (JPM) are top holdings. Dimensional and Magellan hold Visa, while capital and Dimensional back JPMorgan.

Morningstar senior equity analyst Brett Horn says Visa is a unique mix of established market leader plus strong growth prospects.

“The shift toward electronic payments has aided Visa’s growth historically, and we expect that to continue for the foreseeable future,” he says.

“Visa’s position in the global electronic payment infrastructure is essentially unassailable.”
Visa is trading in a range Morningstar considers to be fairly valued. It closed Tuesday $US223.03, versus the fair value of $US215.

There are roughly 3.4 billion Visa cards in circulation.

Funds split over Japan and Europe

The three fund managers differ when it comes to their ex-US exposure. Capital Group is least exposed to the US, with almost a quarter of the fund invested in Europe, versus roughly 15% for the other two funds.

Dimensional has about 7% of the fund tilted at Japan, double Capital Group. Magellan has zero direct exposure to Japan. Dimensional’s Japanese holdings are spread widely and include giants Toyota, Sony and Softbank.

SoftBank (9984) is a telecom and e-commerce conglomerate. It’s $100 billion Vision Fund 1 invests in pre-IPO internet companies. It closed at 7,041 Yen, a 23% discount to the 9,200 Yen fair value.

The Japanese share market hit its highest level since 1990 on Tuesday.

Magellan distinguishes itself with bets on Chinese tech. As of 30 June, nearly 10% of the portfolio sat in Alibaba and Tencent Holdings. Both are down more than 20% since then.

Cash levels are low at all three managers. Capital Group and Magellan are sitting with about 5% of the portfolio in cash. Dimensional is fully-invested, according to Morningstar data.

Magellan picks up Procter & Gamble

There were limited changes across the three portfolios between March and June/July.

The biggest shift was Magellan swapping Estee Lauder (EL) for wide-moat consumer business Procter & Gamble Co (PG), giving the latter a 2.88% chunk of the portfolio. It also reduced its holdings of US utilities Xcel Energy (XEL) and WEC Energy Group (WEC).

In his August presentation of Magellan Financial Group’s results, chief investment officer Hamish Douglass said the fund’s China exposure had been reduced. Updated holding data has yet to be released

Procter & Gamble closed Tuesday at $US145.43, a 23% premium to the fair estimate of $US118.

Mixed performance report cards

Despite all posting double digit annualised returns for the last five years, performance versus the index has been mixed.

Magellan’s underperformance is most dramatic, lagging the MSCI World Ex Australia NR AUD by 19% on a 1-year basis. That’s pressured longer term returns and Magellan now lags the index by 1.2% on a 5-year basis.

At the other end, Capital Group leads the index over the 3-to-5-year horizon, up 4.4% and 3.7%, respectively.

Dimension’s index-like strategy meant it deviated from the index by less than 1% over the one-to-five-year horizon.

On a 5-year basis all three funds beat the average for their category of fund by between 0.4% and 5.3%.

is a reporter and data journalist with Morningstar. Tweet him @lewjackk or get in touch via email

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