| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 10% | 4.3% | -7.1% |
Magellan Global Opportunities Fund returned 4.3% in Q2 2026 but underperformed its benchmark by 8.2% as global markets rallied 12.5% driven by bubble-like conditions in semiconductors and AI-related stocks. The Philadelphia Semiconductor Index surged 88%, its largest quarterly gain on record, with memory names like Micron up 242% driven by momentum rather than fundamentals. The manager views this as a dangerous speculative bubble and deliberately avoided late-cycle exposure to protect against permanent capital loss. Top contributors included TSMC, which raised revenue growth guidance on AI chip demand, UnitedHealth, which improved margins through operational discipline, and Adidas, which demonstrated strong brand momentum. Key detractors were Intuit, affected by AI disruption concerns in software, Netflix, which faced near-term engagement headwinds, and ICE, impacted by multiple sector-specific concerns. The manager is using market narrowness to add selectively to quality franchises outside favored themes now available at valuations implying attractive expected returns since the post-Covid period. With resilient activity but persistent inflation keeping central banks hawkish, the focus remains on businesses with durable competitive advantages and strong long-term compounding potential trading at sensible prices.
The fund invests in outstanding companies at attractive prices while exercising deep understanding of the macroeconomic environment to manage investment risk, focusing on companies with sustainable competitive advantages that translate into returns on capital in excess of their cost of capital for sustained periods.
The manager views the current period as dangerous for markets, with AI exuberance having morphed from rational to irrational speculation. While manias can persist longer than valuation suggests, history is consistent on the outcome for those who buy into crowded, richly priced leadership late in its run. The manager will not attempt to call timing but remains disciplined, preferring to forgo the final stretch rather than expose capital to permanent loss. The opportunity lies in quality franchises outside favored themes now available at valuations implying attractive expected returns. Mindful of resilient activity and elevated inflation, the manager is adding selectively to businesses where they anticipate strong long-term compounding, focusing on companies whose worth is undiminished even as market attention is directed elsewhere.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jul 14 2026 | 2026 Q2 | ADDYY, AMZN, ASML, GOOGL, ICE, INTU, MA, META, MSFT, NESN SW, NFLX, SAP, SPGI, TSM, UNH | AI, Bubble, global, Quality, semiconductors, technology, valuation | META | Magellan underperformed in Q2 2026 as semiconductor stocks surged 88% in bubble-like conditions the manager deliberately avoided to protect capital. The fund added to quality franchises outside AI themes now trading at post-Covid attractive valuations. Top contributors were TSMC on AI chip demand, UnitedHealth on margin recovery, and Adidas on brand momentum. The manager views current market narrowness as creating compelling long-term opportunities in neglected quality businesses. |
| Apr 17 2026 | 2026 Q1 | ASML, MSFT, SAP, TSM, USB | AI, energy, Geopolitical, semiconductors, software, technology | SAP | Magellan Global Opportunities Fund fell 11.0% in Q1 2026 as AI disruption fears and Middle East conflict drove energy prices up 70% and created stagflationary pressures. Semiconductor names like TSMC and ASML outperformed on AI chip demand while software stocks struggled. The manager sees compelling opportunities emerging from the correction in high-quality names. |
| Jan 18 2026 | 2025 Q4 | AMT, AMZN, DEO, DG, ES, GOOGL, LLOY.L, MA, META, MSFT, NESN.SW, SAP, TSM, UNH, ZBH | AI, Cloud, Consumer Staples, global, large cap, Quality, technology | - | Magellan Global Opportunities delivered 13.0% in 2025, outperforming benchmarks through selective positioning in quality companies. AI leaders like Alphabet drove performance while defensive positioning in consumer staples like Nestlé provides stability. Despite positive fiscal and monetary catalysts for 2026, elevated valuations and geopolitical risks support continued defensive approach focused on sustainable competitive advantages. |
| Sep 30 2025 | 2025 Q3 | ADS.DE, AMT, AMZN, AVGO, DEO, ES, GOOGL, MA, META, MSFT, NESN.SW, NKE, NVDA, ORCL, PUM.DE, RKT.L, SAP, T, TSM, UMG.AS, UNH, YUM | AI, consumer, global, growth, Quality, semiconductors, technology | - | Magellan delivered solid Q3 returns despite lagging benchmark in risk-on environment. Portfolio emphasizes quality companies with competitive moats across technology and consumer sectors. Manager maintains cautious stance on full market valuations while identifying individual stock opportunities. Recent AI rally viewed as increasingly speculative, though constructive on US economic activity supported by Fed easing. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
AIThe manager views AI as having morphed from sensibly priced fundamentals into a speculative bubble driven by momentum and FOMO. Exuberance has moved from rational to irrational, resulting in extreme price moves in semiconductors and data center beneficiaries. The manager deliberately avoids late-cycle exposure to crowded, richly priced AI leadership to protect against permanent capital loss when sentiment turns. |
Semiconductors Data Centers Bubble Speculation Valuation |
Semiconductor CycleThe Philadelphia Semiconductor Index surged 88% in the quarter, its largest quarterly gain on record, surpassing dot-com bubble era moves. Memory and storage names like Micron, Intel, Marvell and AMD posted extraordinary gains driven by momentum-chasing rather than fundamental repricing, leaving valuations stretched. The manager views this as bubble-like conditions and remains disciplined to avoid permanent capital loss. |
Memory Foundries Valuation Bubble Momentum | |
Data CentersTSMC benefited from AI chip demand and data center expansion, raising its 5-year revenue growth CAGR by 5 points to 25% annually. The company also raised long-term gross margin guidance, signaling confidence in productivity, cost efficiencies and pricing power. However, the broader market's assumption that current elevated profitability in data center beneficiaries will not only be sustained but continue to expand is viewed skeptically by the manager. |
AI Semiconductors Capex Infrastructure | |
StreamingNetflix gave up gains after walking away from its Warner Bros Discovery bid, affected by a more positive macro outlook, higher interest rates, and limited near-term US engagement growth. The manager views engagement concerns as largely short-term issues driven by strong sporting calendar and short video algorithm improvements. Netflix is well-placed to maintain its position as the dominant streaming platform for professional content and grow profits strongly over the medium term. |
Media Content Engagement Competition | |
Managed CareUnitedHealth recovered from depressed levels with a strong Q1 result showing medical care ratio improvement to 83.9% from 84.8% a year earlier, prompting management to raise FY26 adjusted EPS guidance. The result reflected prioritization of margin recovery over membership growth, including trimming Medicare Advantage membership and restoring operational discipline at Optum Health. Softer industry-wide medical cost trends and a larger-than-proposed 2027 Medicare Advantage rate increase further supported sentiment. |
Healthcare Medicare Margins Utilization | |
AdvertisingMeta's AI-driven improvements to recommendation and ranking systems have lifted engagement, increased ad load and impressions per hour, and enabled higher ad prices without eroding advertiser returns. This has driven revenue growth re-acceleration into the mid-to-high twenties with comparatively modest incremental spend. The manager views Meta as a category-dominant advertising franchise demonstrably able to convert AI into profit within its core business. |
Digital Social Media AI Targeting | |
Enterprise SoftwareIntuit performed poorly due to broad market concerns about AI disruption of incumbent software providers and specific concerns about its tax business where low-end competition led to a small miss against guidance. SAP was the top detractor for the year. The manager views Intuit's SMB platform in QuickBooks as resilient to AI disruption, though concerns about the tax business are more warranted given consumer price sensitivity and potential for disruptive AI offerings. |
SaaS AI Disruption SMB Competition | |
InflationFalling oil prices following progress on a US-Iran deal took much of the heat out of the inflation scare that defined March, shifting the mood from stagflation fears towards a more manageable slowdown. However, some energy costs notably gas remained elevated, economic activity proved resilient, and inflation stayed sticky. This led to a hawkish shift in interest-rate expectations with markets pricing rate hikes rather than cuts in both the US and Australia. |
Energy Rates Central Banks Stagflation | |
| 2026 Q1 |
AIAI disruption concerns affected software stocks during the quarter, with fears over earnings durability after Anthropic's new Claude tools. However, the manager views AI as an opportunity for well-positioned companies like SAP, which can leverage rich proprietary data flowing through ERP systems to deliver AI solutions. |
Software Disruption ERP Enterprise |
EnergyThe US-Israel-Iran conflict triggered a sharp escalation in energy costs, with oil prices surging as much as 70% at their peak. The Energy sector outperformed significantly during the quarter, rising 37.7% as the Strait of Hormuz became a global economic chokepoint. |
Oil Geopolitical Inflation Supply Chain | |
SemiconductorsStrong AI chip demand drove TSMC's outperformance, with the company raising 5-year revenue growth guidance by 5 percentage points to 25% CAGR. ASML also benefited from exceptional bookings as customers expanded manufacturing capacity plans in response to strong demand for AI chips. |
TSMC ASML Manufacturing Capacity | |
| 2025 Q4 |
AIAI continues to drive market leadership with mixed performance across mega-cap stocks. Google demonstrated strong AI integration across search and cloud, while Microsoft faced moderating optimism on AI positioning. Meta's AI investments show uncertain returns but management is becoming more agile with capital allocation. |
Artificial Intelligence Cloud Computing Search Advertising Infrastructure |
CloudCloud computing showed acceleration with Amazon's AWS delivering strong Q3 growth as increased capex began generating returns. Microsoft's Azure growth moderated but all incumbent cloud providers are viewed as long-term winners in the AI transition. |
AWS Azure Infrastructure Computing Growth | |
Consumer DefensiveNestlé represents an opportune investment in world-leading consumer brands with favorable long-term growth outlook. The company faces near-term challenges from commodity inflation and leadership changes but possesses strong competitive positioning in coffee, pet care, and confectionery categories. |
Brands Coffee Pet Care Pricing Power Scale | |
| 2025 Q3 |
AIRenewed enthusiasm in the AI trade has driven markets to fresh highs, with large deals announced by OpenAI with Nvidia, Broadcom, Oracle and AMD. However, these deals are somewhat circular and heavily dependent on OpenAI growing and monetising its user base given its limited current revenue. While positive on GenAI's long-term potential, considerable uncertainty remains on the pace and degree of monetisation, resulting in increasing risks to the market. |
OpenAI Monetisation Chips Data Centers GenAI |
SemiconductorsSemiconductor demand sentiment was lifted by announcements of several OpenAI partnerships with Oracle, Nvidia and Broadcom. These were positive developments in their potential to drive incremental demand for AI-related chips and manufacturing capacity. However, focus remains on end-market demand dynamics necessary to support these capacity plans, particularly given single-customer concentration. |
TSMC Nvidia Broadcom Manufacturing Capacity | |
AthleisureAdidas represents a compelling long-term opportunity as the world's #2 player in athletic footwear and apparel. The brand benefits from strong economic moats including brand equity, marketing reach, R&D capabilities and global distribution networks. Adidas consistently reinvests around €3 billion annually in marketing to defend competitive advantages, supporting partnerships with athletes, teams and sporting events. |
Adidas Nike Sportswear Brand Marketing |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Jul 14, 2026 | Fund Letters | Magellan Global Opportunities Fund No. 1 | META | Meta Platforms | Internet Content & Information | Interactive Media & Services | Bull | NASDAQ | Artificial Intelligence, digital advertising, Equity, growth, Interactive Media, network effects, operating leverage, social media, technology platform, user engagement | Login |
| Apr 17, 2026 | Fund Letters | Magellan Global Opportunities Fund No. 1 | SAP | SAP SE | Software - Application | Application Software | Bull | - | AI integration, Cloud transformation, Enterprise software, ERP, market leader, Mission-Critical, Predictive analytics, proprietary data, SaaS, workflow automation | Login |
| TICKER | COMMENTARY |
|---|---|
| TSM | TSMC is a beneficiary of both AI chip investment and the data centre expansion cycle. In response to strong AI chip demand, TSMC raised its 5-year revenue growth CAGR by 5 points to 25% pa. While the growth will be supported by a large step up in FY26 capex (benefiting semi cap vendors like ASML), TSMC also raised its long-term gross margin guidance, signalling confidence in its ability to drive productivity, cost efficiencies and pricing power. |
| UNH | UnitedHealth recovered from depressed levels due to a strong 1Q result with the medical care ratio improving to 83.9% (from 84.8% a year earlier), prompting management to raise FY26 adjusted EPS guidance. The result reflected a prioritisation of margin recovery over membership growth, including trimming Medicare Advantage membership and restoring operational discipline at Optum Health. Softer industry-wide medical cost and utilisation trends and a larger-than-proposed 2027 Medicare Advantage rate increase further supported sentiment. |
| ADDYY | Adidas delivered a strong 1Q earnings result at the end of April that demonstrated broad-based brand momentum across sports performance and lifestyle products, continuing market share gains and margin expansion. Strong execution of brand and marketing initiatives throughout the 2Q26 FIFA World Cup has further increased market confidence in near-term sales results, cash generation and brand momentum. |
| INTU | Intuit performed poorly on a combination of i) broad market concerns regarding the disruption of incumbent software providers, and ii) specific concerns related to its tax business where competition at the low end led to a small miss against guidance. We continue to view Intuit's SMB platform in QuickBooks as resilient to AI disruption and more than underpinning Intuit's current market valuation. Concerns about its tax business are more warranted, with consumer price sensitivity this tax season highlighting the impact a disruptive AI offering could have. That said, Intuit's tax business is increasingly driven by more complicated tax offerings that should be more resilient. |
| NFLX | Netflix has given up a lot of the gains following its rally after walking away from its bid for Warner Bros Discovery. This was driven by a combination of a more positive macro outlook and higher interest rates (Netflix is viewed as defensive) and limited near-term engagement growth in the US. We view the latter as largely a short-term issue driven by a strong sporting calendar and growth in engagement of short video due to improvements in algorithms. We continue to view Netflix as well-placed to maintain its position as the dominant streaming platform for professional content and grow profits strongly over the medium term. |
| ICE | ICE was affected by a combination of i) broad concerns about the disruption of software by AI that applies to a small part of its business, ii) a decline in exchange energy volumes as the US and Iran reached a ceasefire, iii) US approval of perpetual futures for bitcoins and a stated willingness to consider additional asset classes and iv) a more resilient macro outlook and associated higher rates, which affects valuation and volumes in its mortgage business. We consider these concerns misplaced in aggregate and ICE as well-positioned to grow earnings at a healthy rate over time. With respect to perpetual futures and prediction markets, we consider the risks to ICE to be very low given limited exposure to retail trading and equities. |
| META | Meta Platforms has grown into one of the most widely used communication and media networks in history. Its Family of Apps – Facebook, Instagram, WhatsApp and Threads – now reaches more than 3.5 billion people every day. While durable economic moats are rare in consumer technology, we believe Meta's are unusually deep. Powerful network effects make its apps more valuable to each user as more people join; an enormous base of first-party engagement data allows it to match advertisers to audiences with a precision few rivals can replicate; and the sheer scale of its infrastructure and ad system creates cost and capability advantages that are difficult to challenge. Over recent years the company has rebuilt its recommendation and ranking systems around increasingly sophisticated AI models. The effect is visible across the platform: better algorithms have lifted engagement, with time spent and video watch time rising across both Facebook and Instagram; more dynamic approaches to ad delivery have increased ad load and impressions per hour of engagement; and improved targeting, together with lower content-creation costs for advertisers, has allowed for higher ad prices without eroding the returns advertisers earn. The result has been a re-acceleration of revenue growth into the mid-to-high twenties. This cash generation, combined with the natural operating leverage of the platform, is being reinvested into a second and altogether more ambitious set of AI initiatives. Meta is spending heavily to build frontier models through Meta Superintelligence Labs and the recently released Muse family. A frontier model is valuable internally and is also licensable to third parties, opening a route to API revenue. Personal and business agents could embed Meta's apps even more deeply into users' daily lives while creating fresh monetisation paths. Non-advertising services for the creators and businesses already on the platform offer a way to diversify revenue away from advertising. And in hardware, Meta's AI glasses are emerging as a best-in-class platform, with the number of daily users tripling year-on-year. At roughly 17 times forward earnings for a category-dominant business growing revenue above 20%, the market appears to be capitalising these AI investments into perpetuity as pure cost, while extending Meta no credit at all for the revenue or profit they might ultimately produce. If we strip out the non-core AI investment, we estimate Meta could be earning operating margins close to 50%, against the roughly 35% expected in 2026. On that basis the shares trade closer to 12 times forward earnings, which we regard as very good value for a business of this quality, scale and durability. |
| SAP | SAP was the top detractor for the year with a contribution to return of -2.9%. |
| MSFT | Microsoft was a top detractor for the year with a contribution to return of -2.5%. |
| GOOGL | Alphabet was a top contributor for the year with a contribution to return of 2.5%. |
| ASML | ASML was a top contributor for the year with a contribution to return of 0.9%. |
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