Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 348

Douglass on coronavirus: 'Expect volatility but don't panic'

"Expect volatility but don't panic, would be my view, because before 12 months, I think we'll be looking back, and this event will have passed."

This is the view Magellan's Hamish Douglass delivered to the thousands of investors who packed Sydney's International Convention Centre on Friday night to hear his latest update.

With fears about the coronavirus pushing stocks closer to a bear market, Douglass adopted a relaxed tone, telling investors to sit tight and take a long-term view. He told the crowd of advisers, industry professionals, retail investors and students.

"Our best view is that this may be six times as serious as the seasonal flu.

"While [the virus] is going to affect a lot more people, I think the spread may well be less because of the extreme containment measures. But with the extreme containment measures is going to come a pretty sharp economic impact around the world, which will realistically be three to six months.

"During that period, I would expect a lot of share price volatility as people react to the headlines. I think if we look a little bit longer out, this flu or pandemic or whatever you want to describe it will have its consequences. But the economic effect is likely to pass very quickly."

Douglass avoided discussing the virus for much of the presentation, devoting his time on stage to how interest rates will affect equity valuations and the rise of the Chinese consumer.

But talk of the virus, which dominated headlines for the days leading up to the event, infected audience question time.

Magellan Global Fund Portfolio Holdings, 31/12/2019

Source: Morningstar Direct

'Buy the dips'

Douglass was more eager to share his view on opportunities in the market as global banks rush to slash interest rates to fight coronavirus.

"While people are panicking and very concerned about the short-term economic impact, what the central banks are doing, and I think they're going to go further here, is they're further reducing interest rates.

"So, when we come out of this, we're going to be even in a lower interest rate world, which is supportive of higher valuations. Once you've lowered, the cost of lifting interest rates is very high. This has a very interesting dynamic for valuations when people's panic stops.

"If there are any severe dips here, my advice to people would be buy, and just expect more volatility. You're very unlikely to pick the bottom of any of the sort of ups and downs. But I expect when we get some calm water, some of the businesses will be reflecting the low interest right, which is kind of a benefit to all this uncertainty."

Magellan sees opportunity in China

Investing in China is clearly on Douglass's mind following the Magellan Financial Group’s first direct investment into the rising global power, with a 6.5% holding in Chinese online platform Alibaba. It also invests in other Chinese-market linked companies such as coffee giant Starbucks and luxury French brand LVMH Moët Hennessy – Louis Vuitton.

On stocks within his own portfolio, Douglass acknowledged that things could get ugly in the short term, but insists he is doing nothing to fundamentally change the portfolio.

"Starbucks closed half their stores in China. It's just said it's going to have a severe impact on the China business in the next three months. We know that. Its share price has been affected somewhat. But in 12 months' time, it won't have any real impact on the long-term value of a Starbucks or a Louis Vuitton."

Within the Magellan Global Fund, Douglass has taken major bets on several US tech names including Microsoft, Facebook and Alphabet, and payments giants Mastercard and Visa.

Starbucks and Alibaba both provided personalised video presentations for the roadshow. Starbucks plans to open a new store every 15 hours in China between now and 2022, Starbucks Chief Executive Kevin Johnson told the audience.

Magellan Global, Asset Allocation, 2015 - 2019

Source: Morningstar Direct

None of the Magellan Global Fund's top 10 holdings (at 31 December 2019), excluding cash, has been spared from the virus. The worst hit is Facebook, down 16% over the last month. NASDAQ is down 16.5% for the month, and the SPDR S&P 500 ETF, a proxy for the S&P 500 Index, is down 13.8%.

Magellan Global has slowly reduced its cash position over the last two years, from highs of 18.35% in mid-2018 to just under 6% at the end of 2019.

 

Emma Rapaport is Editor of Morningstar.com.au. The author attended 'The Great Repression: Magellan Investor Evening Series' on 6 March 2020 as a guest of Magellan.

Hamish Douglass is Co-Founder, Chairman and Chief Investment Officer of Magellan Asset Management, a sponsor of Firstlinks.

 

RELATED ARTICLES

SMSFs and COVID: the biggest trends in 5 charts

banner

Most viewed in recent weeks

The case for the $3 million super tax

The Government's proposed tax has copped a lot of flack though I think it's a reasonable approach to improve the long-term sustainability of superannuation and the retirement income system. Here’s why.

7 examples of how the new super tax will be calculated

You've no doubt heard about Division 296. These case studies show what people at various levels above the $3 million threshold might need to pay the ATO, with examples ranging from under $500 to more than $35,000.

The revolt against Baby Boomer wealth

The $3m super tax could be put down to the Government needing money and the wealthy being easy targets. It’s deeper than that though and this looks at the factors behind the policy and why more taxes on the wealthy are coming.

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

The super tax and the defined benefits scandal

Australia's superannuation inequities date back to poor decisions made by Parliament two decades ago. If super for the wealthy needs resetting, so too does the defined benefits schemes for our public servants.

Are franking credits hurting Australia’s economy?

Business investment and per capita GDP have languished over the past decade and the Labor Government is conducting inquiries to find out why. Franking credits should be part of the debate about our stalling economy.

Latest Updates

Superannuation

Here's what should replace the $3 million super tax

With Div. 296 looming, is there a smarter way to tax superannuation? This proposes a fairer, income-linked alternative that respects compounding, ensures predictability, and avoids taxing unrealised capital gains. 

Superannuation

Less than 1% of wealthy families will struggle to pay super tax: study

An ANU study has found that families with at least one super balance over $3 million have average wealth exceeding $19 million - suggesting most are well placed to absorb taxes on unrealised capital gains.   

Superannuation

Are SMSFs getting too much of a free ride?

SMSFs have managed to match, or even outperform, larger super funds despite adopting more conservative investment strategies. This looks at how they've done it - and the potential policy implications.  

Property

A developer's take on Australia's housing issues

Stockland’s development chief discusses supply constraints, government initiatives and the impact of Japanese-owned homebuilders on the industry. He also talks of green shoots in a troubled property market.

Economy

Lessons from 100 years of growing US debt

As the US debt ceiling looms, the usual warnings about a potential crash in bond and equity markets have started to appear. Investors can take confidence from history but should keep an eye on two main indicators.

Investment strategies

Investors might be paying too much for familiarity

US mega-cap tech stocks have dominated recent returns - but is familiarity distorting judgement? Like the Monty Hall problem, investing success often comes from switching when it feels hardest to do so.

Latest from Morningstar

A winning investment strategy sitting right under your nose

How does a strategy built around systematically buying-and-holding a basket of the market's biggest losers perform? It turns out pretty well, so why don't more investors do it?

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.