Should You Buy Magellan Financial Group Ltd At This Share Price?

When will we get out of this slump?

Magellan Financial Group Ltd [ASX:MFG] has lately found a spot in my trading portfolio. There is no doubt that MFG has a momentum deserving of investors’ attention.

However, it was quickly ‘kicked off’ from my positions this morning at market open, due to opening too low.

I keep a close ‘leash’ on the stock’s volatility, which is to say I have a tight stop-loss on the stock. Although the long term trend of the stock has been healthy-looking, MFG is capable of delivering unexpected one-week drops periodically.

In fact, its risk level was already close to being ‘thrown out’ of the portfolio when I added it last week, and only turned things around morning.

Will I forget about MFG for now? Not quite yet. I have put the stock in my reserve watch list. I know the current market turmoil will pass. That means there is a chance for MFG to redeem itself and recover its own attractiveness. We will see…

In terms of the broader Aussie market, I want to answer the following questions: how bad will it get, and how long will it last?

There are two camps on this one, the ‘crisis camp’ and the ‘rebound camp’. I am in the rebound camp, because I simply don’t know if this is going to be a full-on crisis.

If it is going to be a larger crisis than previously thought, then the period of market slump will be longer, and the downward pressure will be larger.

If it is not going to be a full-on crisis, then a rebound can kick in at any time.

In terms of time count, the big market slumps went for about 50–60 weeks before the market started to rebound. This means, if our current market slump is a reasonably big one and it is not as severe as the Global Financial Crisis, it will last for about 50–60 weeks before it rebounds.

The current ‘bear market’ has been going for 43 weeks. It means we could be heading into the most ‘painful’ 10–20 weeks of the market.

If it’s not as severe as the other major drops, then we can rebound soon.

Ken Wangdong

Emerging Market Analyst, New Frontier Investor

Join Money Morning on Google+


At Money Morning our aim is simple: to give you intelligent and enjoyable commentary on the most important stock market news and financial information of the day - and tell you how to profit from it. We know the best investments are often the hardest to find. So that's why we sift through mountains of reporting, research and data on your behalf, to present you with only the worthwhile opportunities to invest in.

Become a more informed, enlightened and profitable investor today - by taking out your free subscription to Money Morning now.


Money Morning Australia