The question that probably dominates the mind of investors this week is whether the Macquarie Group Ltd (ASX: MQG) plunge represents an opportunity to buy. The price of the MQG shares fell 5.4% to $ 128.81 on Friday – making the stock the second worst result on the S & P / ASX 200 (Index: ^ AXJO) (ASX: XJO) with the price of the shares of JANUS / IDR UNRESTR (ASX: JHG) the wooden spoon fell by 12.1% to $ 30.96 and the share price of Bravura Solutions Ltd (ASX: BVS) in third place fell by 4.8 % at $ 5.94. It is rare to see Macquarie among the biggest losers and it is even rarer for the …
The question that probably dominates the mind of investors this week is whether the Macquarie Group Ltd (ASX: MQG) The dive represents a purchase opportunity.
The stock price of MQG fell 5.4% to $ 128.81 on Friday – making the stock the second worst performer on the market S & P / ASX 200 (Index: ^ AXJO) (ASX: XJO) with JANUS / IDR UNRESTR (ASX: JHG) market share by taking the wooden spoon while it fell by 12.1% to $ 30.96 and the Bravura Solutions Ltd (ASX: BVS) share price in third place while decreased by 4.8% to $ 5.94.
It is rare to see Macquarie among the biggest losers and it is even rarer that the investment bank makes a profit downgrade.
Downgrading of de facto profit
It is almost unthinkable that the "Millionaires Factory" can disappoint the market, given its long experience in terms of promising and excessive results.
But disappointment is what has made Shemara Wikramanayake, CEO of Macquarie, when the bank revealed that FY20 earnings will probably be lower than this financial year, even though the FY19 record profit of close to $ 3 billion was a bit Later than the consensus.
This will not stop a wave of downgrades by brokers, as consensus forecasts showed a 5% increase in earnings per share in the year 20.
This left investors wondering if they should buy or sell the stock next week. The answer is probably both, in my opinion.
Is the stock cheap?
The fact is that Macquarie's share price seems interesting to me at current levels. I don't think management has given up its promises and renounced the mantra, and this means that the FY20 is more than likely to be better than the "slight" drop in profit for that year (except for a Black Swan event).
If the gains reach the same level as FY19, this would put the stock on a multiple of price gains of 14.5 times. This is in line with the ASX 200.
Some might say that it doesn't make Macquarie cheap, but shares in well-run companies with a solid track record are rarely.
I suspect we will see Macquarie stock trading closer to $ 150 than $ 100 by the end of the year, unless there is a long and sustained downturn in the global market.
Time the voice
On the other hand, at this time it may not be the best time to buy the stock, not if you believe that our market will fall back as normally happens in May and June.
There are many theories as to why the markets have receded during this period over many years, and I will not go into why this article. But I will say that I suspect this trend will be evident this time because global stock markets have started to heat up from the beginning of the year and are trading at relatively high valuations.
Meanwhile, earnings growth in the United States and here has not kept pace – at least not enough to justify the increase in the market without the need for a break.
If we experience weaknesses in the coming weeks, Macquarie's shares will be more affected as they are high beta beta stocks. I would wait for the drop before adding to my position.
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Brendon Lau owns shares in Macquarie Group Limited. The Motley Fool Australian mother company Motley Fool Holdings Inc. owns shares in Bravura Solutions Ltd. The Motley Fool Australia has recommended Bravura Solutions Ltd and Macquarie Group Limited. We Fools may not all have the same opinions, but we are all convinced that, considering a wide range of insights, we have become better investors. The Motley Fool has a disclosure policy. This article contains only general investment recommendations (with AFSL 400691). Authorized by Scott Phillips.
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