Magellan Leads Managed Funds in Feeling the Meta Stock Pain


Simon Scott and Callan Maclennan  |   28th Apr 2022  |   5 min read

Some well-known managed funds are taking a hit from the roughly 25% plunge in Meta Platforms’ FB shares on 3 Feb 2022. This occurred after Meta, the parent company of Facebook, reported mixed fourth-quarter earnings. That report shaved USD 200 billion off Meta’s market value—an amount greater than the entire market valuation for McDonald’s and the Greek economy.

For years, Meta has been one of the largest stocks by market capitalization and one of the most widely held names by managed funds, as the so-called FAANG stocks (Facebook, Amazon.com, Apple, Netflix, and Google [now Alphabet]) become mainstays of portfolios. Several strategies have particularly large weightings of the company in their portfolio.

We looked at the funds that had significant exposure to Meta within their portfolios, and those whose positions held the highest market value. Below is a list of actively managed funds where managers have opted to hold a hefty stake in the social-media company.

In comparison, the MSCI World ex Australia NR AUD Index had a weighting of 1.3% as of 31 Dec 2021, and the Morningstar US Market Index had a 1.7% weighting. Growth strategies had a higher exposure, with the Morningstar Large Growth Index holding a 3.7% weighting in the social-media company.

Among the global-equity funds with the most riding on Meta is one of the best-known actively  managed strategies, Magellan High Conviction (19878) run by Hamish Douglass. The AUD 650 million unlisted fund, which has a Morningstar Analyst Rating of Silver, had a 12.35% weighting in Meta as of 30 June 2021, and the company has been a mainstay in the fund’s top five holdings. Magellan Global (19877) and Magellan Sustainable (43991) were also heavily exposed with 3.9% and 6.2% weightings,
respectively, at 31 Dec. Notably, these weightings were reduced over the second half of 2021; the Global fund held 6.4% in Meta at 30 June, while the Sustainable fund had 6.7% of its assets in the company.

To put this into perspective, an investor with $10,000 in Magellan High Conviction owned almost $1,235 worth of Meta stock based on the latest reported data. All else being equal, last week’s decline would have shaved $309, or 3.09%, off their investment. Indeed, the listed version of the fund fell by more than this on 3 Feb.

Meta’s ability to generate healthy operating margins and free cash flow was a favourite among growth strategies, and it also possessed competitive advantages and improving earnings potential. As of 31 Dec, Meta commanded a 5.76% weighting in Bronze-rated Hyperion Global Growth Companies  (42173), which has a relatively concentrated portfolio at just over 30 stocks.

Exchange-traded funds were not immune, either. Silver-rated VanEck MSCI World ex Australia Quality
ETF QUAL and BetaShares Nasdaq 100 ETF NDQ held 4.79% and 4.85% of assets, respectively, in Meta at the end of December 2021. The more concentrated ETFS Fang+ ETF FANG held a 9.93% position as at 2 Feb 2022.

While Meta has tended to be popular among growth managers, it’s also found interest with one contrarian value shop. As of the end of December, Forager International Shares’ (19793) Meta position
constituted 4.46% of assets.

Looking back at the history of funds with hefty Meta stakes, many of these managers maintained  sizable positions as Meta’s stock rallied in recent years.

When it comes to Meta holdings by overall market value, Magellan again dominates the list. As at 31 Dec, Magellan Global held a position valued at over AUD 550 million, roughly 4 times the size of the benchmark-tracking BetaShares Nasdaq 100 ETF’s NDQ position, which was 4.85% at the end of December, according to the most recent data available.

While concentrated growth portfolios have been attractive over the past few years, recent market movements have shown the pitfalls of significant exposure to any single holding. Investors should keep any eye on the top holdings of their funds to ascertain any concentration risks in their portfolios and understand that single stocks can reverse trajectory quickly. These strategies have had a fright, though they are still among the leading contenders.

Originally posted 2022-02-22 15:54:45.


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