| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 10.9% | 4.5% | - |
Magellan Global Opportunities Fund returned 4.5% in Q2 2026 but significantly underperformed the benchmark's 12.5% return as markets entered what the manager characterizes as a dangerous bubble period. The MSCI World Index surged on relief from US-Iran conflict de-escalation and falling energy prices, but the real driver was extreme speculation in semiconductors and AI-related stocks, with the Philadelphia Semiconductor Index posting its largest quarterly gain on record at 88%. The manager views this as irrational exuberance driven by momentum-chasing and FOMO rather than fundamental repricing, leaving valuations stretched. Portfolio contributors included TSMC, UnitedHealth, and Adidas, while detractors included Intuit, Netflix, and Intercontinental Exchange. The manager maintains strict discipline, refusing to chase crowded, richly-priced leadership late in its run. Instead, they are selectively adding to neglected quality franchises now available at valuations implying the most attractive expected returns since the post-Covid period. The fund holds 20-40 positions focused on companies with sustainable competitive advantages and returns on capital exceeding their cost of capital, with cash exposure between 0-5%.
The fund invests in outstanding global companies at attractive prices while exercising deep understanding of macroeconomic risks, maintaining a disciplined approach to avoid bubble-like conditions in favor of quality franchises with durable competitive advantages trading at sensible valuations.
The manager expects a dangerous period for markets as AI exuberance has reached bubble-like conditions, particularly in semiconductors and data center beneficiaries. While manias can persist longer than valuations suggest, they view the outcome as historically consistent for late buyers. They see opportunity in neglected quality franchises outside favored themes now available at attractive valuations, and plan to add selectively to businesses with strong long-term compounding potential while maintaining discipline to avoid permanent capital loss.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| Jul 14 2026 | 2026 Q2 | ADDYY, AMZN, ASML, CMG, GOOGL, ICE, INTU, MA, META, MSFT, NESN SW, NFLX, SAP, SPGI, TSM, UNH | AI Bubble, Global Equities, long-term, Quality, semiconductors, technology, valuation | META | Magellan Global Opportunities returned 4.5% in Q2 2026, underperforming the 12.5% benchmark as AI speculation reached bubble-like extremes with semiconductors surging 88%. The manager refuses to chase momentum-driven leadership, instead selectively adding to neglected quality franchises at the most attractive valuations since post-Covid. Portfolio holds 20-40 high-quality global companies with durable competitive advantages, maintaining discipline to avoid permanent capital loss. |
| Apr 17 2026 | 2026 Q1 | ASML, MSFT, SAP, TSM, UMG.AS, USB | AI, energy, Geopolitical, global, software, technology | - | Magellan Global Opportunities underperformed in Q1 2026 due to AI disruption fears and Middle East energy crisis. Taiwan Semiconductor and ASML benefited from AI chip demand while Microsoft and SAP suffered from software concerns. The manager sees current volatility creating attractive entry points for quality companies with strong competitive positions. |
| Jan 18 2026 | 2025 Q4 | AMT, AMZN, CMG, CRM, DG, ES, GOOGL, MA, MELI, META, MSFT, NESN.SW, NVO, OR.PA, SAP, TSM | AI, Cloud, consumer, Defensive, global, Quality, technology | - | Magellan delivered 1.4% in Q4 amid market rotation from AI mega-caps. Portfolio remains defensively positioned despite supportive US macro tailwinds from fiscal and monetary policy. Quality focus on companies like Alphabet, Amazon, and Nestlé provides resilience against elevated valuations and multiple macro risks heading into 2026. |
| Sep 30 2025 | 2025 Q3 | AMT, AMZN, ASML, CMG, ES, GOOGL, INTC, MA, MELI, META, MSFT, NESN.SW, NVDA, NVO, ORCL, SAP, TSM, V, YUM, YUMC | AI, global, large cap, Quality, semiconductors, technology | - | Magellan Global Opportunities underperformed in Q3 as speculative growth outperformed quality. AI enthusiasm drove markets higher but deals appear increasingly circular and dependent on unproven monetisation. TSMC and ASML benefited from semiconductor optimism while consumer names like Chipotle struggled. Manager maintains cautious stance given full valuations but sees individual opportunities in high-quality companies. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q2 |
AIThe manager views AI as having morphed from sensibly priced fundamental opportunities into a speculative bubble driven by momentum and FOMO. They describe dangerous market conditions with extreme moves in semiconductors and data center beneficiaries, resulting in stretched valuations. However, they acknowledge AI is delivering tangible returns within Meta's core business through improved recommendation systems, ad targeting, and engagement. |
Bubble Semiconductors Data Centers Speculation Valuation |
Semiconductor CycleThe Philadelphia Semiconductor Index surged 88% in the quarter, its largest quarterly gain on record, driven by memory and storage names on expectations of continued shortages. Companies like Micron, Intel, Marvell, and AMD posted extraordinary moves of 186-242%. The manager characterizes these moves as driven by momentum-chasing rather than fundamental repricing, leaving valuations stretched. |
Memory Momentum Bubble Valuation Speculation | |
Data CentersTSMC benefited from AI chip investment and data center expansion cycle, 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. The manager views data center expansion beneficiaries as experiencing bubble-like conditions with extreme price moves. |
TSMC AI Chips Capex Bubble | |
StreamingNetflix gave up gains after walking away from its Warner Bros Discovery bid, affected by a more positive macro outlook, higher interest rates (as Netflix is viewed as defensive), and limited near-term US engagement growth. The manager views engagement concerns as largely short-term, driven by strong sporting calendar and short video algorithm improvements, and sees Netflix as well-placed to maintain dominance in professional content streaming. |
Netflix Engagement Competition Defensive | |
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 raised 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. |
UnitedHealth Medicare Advantage Margins Medical Costs | |
ApparelAdidas delivered a strong Q1 earnings result demonstrating 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 Q2 2026 FIFA World Cup further increased market confidence in near-term sales results, cash generation, and brand momentum. |
Adidas Brand Market Share World Cup | |
Social MediaMeta's Family of Apps reaches more than 3.5 billion people daily. AI improvements have lifted engagement with time spent and video watch time rising across Facebook and Instagram, increased ad load and impressions, and allowed for higher ad prices. Revenue growth re-accelerated into the mid-to-high twenties. The manager sees Meta as category-dominant with deep moats, trading at roughly 17 times forward earnings for a business growing revenue above 20%, representing compelling long-term value. |
Meta Engagement Advertising Network Effects Valuation | |
Enterprise SoftwareIntuit performed poorly on broad market concerns regarding AI disruption of incumbent software providers and specific concerns about its tax business where low-end competition led to a small miss against guidance. The manager views Intuit's SMB platform in QuickBooks as resilient to AI disruption and more than underpinning current market valuation, though concerns about the tax business are more warranted given consumer price sensitivity and potential AI disruption. |
Intuit AI Disruption QuickBooks Tax Software Competition | |
| 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 companies like SAP rather than a threat, given their privileged position with proprietary data and trusted customer relationships. |
Software Disruption Enterprise Cloud Data |
EnergyThe US-Israel-Iran conflict created significant energy market disruption, with oil prices surging 70% at their peak. The transformation of the Strait of Hormuz into a global economic chokepoint triggered sharp escalation in energy costs, functioning as a pervasive tax on global consumption and production. |
Oil Geopolitical Inflation Supply Chain Middle East | |
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 and global memory chip shortages. |
AI Chips Memory Manufacturing Capacity Growth | |
| 2025 Q4 |
AIAI dominated market leadership in first three quarters but showed signs of broadening away from AI Mega Cap stocks. Mixed performance among AI leaders with concerns about sustainability of AI spend and business models causing intra-quarter risk premium spikes. Google demonstrated strong AI integration while Microsoft faced moderating optimism on AI positioning. |
Artificial Intelligence Cloud Computing Technology Mega Cap Infrastructure |
CloudAmazon's AWS showed acceleration in Q3 growth as increased capex began delivering returns. Microsoft Azure faced moderating optimism due to strong execution at competitors. All incumbent cloud providers viewed as long-term winners despite short-term relative performance shifts. |
Cloud Computing AWS Azure Infrastructure Technology | |
E-commerceAmazon outperformed on better-than-feared US consumption trends in December quarter. The company is well-positioned to benefit from structural growth in e-commerce alongside cloud computing expansion. |
E-commerce Consumer Digital Commerce Retail Growth | |
Consumer DefensiveNestlé represents an opportune investment in world-leading brands within consumer categories with favorable long-term growth outlook. The company possesses comprehensive pricing architecture through umbrella brands and scale advantages in coffee and pet care categories. |
Consumer Staples Brands Food Beverages Defensive | |
CoffeeCoffee viewed as attractive category that is more experiential and less commoditized relative to other staples. Nestlé delivered positive volume growth despite high-single-digit price increases, reflecting entrenched habits and pricing power. Scale benefits allow supply substitution to mitigate tariff impacts. |
Coffee Commodities Consumer Staples Pricing Power Brands | |
| 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 in nature and heavily dependent on OpenAI growing and monetising its user base given its limited current revenue. While positive on GenAI potential over the long term, considerable uncertainty remains on the pace and degree of monetisation. |
OpenAI Monetisation Chips Data Centers GenAI |
SemiconductorsTSMC benefited from improved semiconductor demand sentiment due to 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 Manufacturing Capacity Demand AI Chips | |
AthleisureAdidas represents a compelling long-term opportunity as the world's #2 player in athletic footwear and apparel. The brand benefits from deep heritage, durable competitive advantages including brand equity and global distribution networks. Adidas was pivotal to the history of athleisure wear, introducing the tracksuit to non-athletes in the 1970s, and continues to benefit from the blending of sports and lifestyle that has broadened its addressable market. |
Adidas Brand Distribution Heritage Lifestyle |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| Jul 14, 2026 | Fund Letters | Magellan Global Opportunities Fund No. 2 | META | Meta Platforms | Internet Content & Information | Interactive Media & Services | Bull | NASDAQ | AI infrastructure, Artificial Intelligence, digital advertising, Equity, network effects, operating leverage, Revenue Growth, social media, technology platform, Value | 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 | Founded in 2004 as Facebook, 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, an audience without real precedent in scale or daily engagement. Alongside Alphabet, Meta sits at the centre of the global digital advertising market, the destination where a meaningful share of the world's attention, and therefore advertising budgets, is spent. While durable economic moats are rare in consumer technology, where platforms can rise and fall quickly, 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. Importantly, Meta reinvests heavily to defend and extend these advantages and has repeatedly shown an ability to adapt its products as consumer behaviour shifts, most recently in the pivot to short-form video. What attracts us today is that artificial intelligence, widely feared as a disruptive threat across the technology sector, is already delivering tangible returns inside Meta's core business. 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. Critically, this was achieved with comparatively modest incremental spend, which is to say it was the cheap part. The benefits continue to compound as the models improve. 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 – the expensive part. Here, Meta is spending heavily to build frontier models through Meta Superintelligence Labs and the recently released Muse family. The market largely treats this as an ongoing cost, but we see it as a portfolio of very cheap options, which together could materially expand Meta's addressable market or lower its cost base. A frontier model is valuable internally and is also licensable to third parties, opening a route to API revenue of the kind earned by OpenAI and Anthropic. Personal and business agents could embed Meta's apps even more deeply into users' daily lives (a phrase that should perhaps come with a warning label) while creating fresh monetisation paths, from commission structures to premium, high-compute tiers for those who want the AI to try harder. Non-advertising services for the creators and businesses already on the platform, early signs of which include the rapid scaling of business AIs, 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, an encouraging early signal of consumer adoption. Every enduring investment case has its area of debate, and for Meta it is the scale, and occasional exuberance, of this investment. Capital expenditure guidance continues to rise, and the absolute numbers are large. However, 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. We do not think that is a coherent medium-term position, particularly given Mark Zuckerberg's track record. He has proven willing to invest aggressively where it is necessary to protect the franchise or where the return potential is real; however, as the 'year of efficiency' demonstrated, he has also shown himself to be highly rational, even ruthlessly focused on growing the value of the business, and quick to retrench when spending fails to earn its keep. We therefore see an unusually attractive asymmetry. Either these investments generate a meaningful return (and Meta's vast, deeply engaged user base is about as natural a distribution advantage as exists in technology) or management pulls back on them, as it has before. 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. We remain conscious of the risks. The most serious is the potential for significant legal liability arising from the platform's impact on adolescent mental health, an area of ongoing litigation and regulatory scrutiny. We are also alert to the possibility of regulation that fundamentally degrades the appeal of Meta's services to adult users, and to the risk that management remains committed to heavy near-term AI spending in a sharply deteriorating economic environment, which would pressure returns at precisely the wrong time. On balance, however, we believe Meta represents a compelling long-term opportunity: a category-dominant advertising franchise, demonstrably able to convert AI into profit within its core business, available at a price that asks us to pay for almost none of the optionality that its investment is creating. That combination of proven quality, durable competitive advantages and an undemanding valuation supports its place as a high-quality, long-duration holding within a global equity portfolio. |
| ASML | 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. |
| SAP | SAP was a key detractor over the 1 year period, contributing -2.5% to returns. |
| MSFT | Microsoft was a key detractor over the 1 year period, contributing -2.5% to returns. |
| CMG | Chipotle Mexican Grill was a key detractor over the 1 year period, contributing -1.7% to returns. |
| GOOGL | Alphabet was a top contributor over the 1 year period, contributing 1.5% to returns. |
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