Is Macquarie Group Ltd (ASX: MQG) the best blue chip to own right now at the current share price?
What is Macquarie?
Macquarie is Australia’s biggest investment bank. It has four segments – Macquarie Asset Management (MAM), Banking and Financial Services (BFS), Commodities and Global Markets (CGM) and Macquarie Capital.
Why could it be such a good ASX blue chip to buy?
It has been a really good blue chip over the last decade, with the Macquarie share price going up by around 300%. Whilst it was crunched hard in the GFC, it recovered strongly and is now a more defensive business than before.
Macquarie has good ‘annuity-style’ businesses that are pretty defensive, particularly the asset management division. It’s one of the largest infrastructure asset managers in the world. It has around $550 billion of assets under management (AUM), diversified across regions, products, asset classes and investor types. The US acquisition is also attractive.
Another ‘annuity style’ business is its banking and financial services – it provides a diverse range of personal banking, wealth management, business banking and vehicle finance products and services to retail clients, advisers, brokers and business clients. It has total deposits of $76.3 billion, a loan and lease portfolio of $84.5 billion and funds on the platform of $97.3 billion.
I think these divisions alone make Macquarie a very attractive business – asset management provides a good level of recurring management fees each year. It’s the global aspect of the business that makes it more attractive to me than banks like Australia and New Zealand Banking Group Ltd (ASX: ANZ) and National Australia Bank Ltd (ASX: NAB).
What about the other divisions?
CGM and Macquarie Capital also earn a solid amount of earnings. In decent or good conditions, these businesses can make good money.
For example, extreme winter weather conditions affecting North America, specifically in Texas, significantly increased short-term client demand for Macquarie’s capabilities in maintaining critical physical supply across the commodity complex and particularly in relation to gas and power.
Macquarie’s commodities and global markets (CGM) business physically ships gas on the majority of major pipelines across the US and over time has built capacity to support clients by delivering power and physical commodities to help them meet the unexpected needs of their customers. Macquarie now expects its overall profit for the year to 31 March 2021 to be up approximately 5% to 10% compared to FY20.
Summary thoughts
Macquarie is a really good ASX blue chip share, it has multiple avenues of growth. The investment bank has expertise in key areas like green energy and infrastructure. It has an attractive dividend payout ratio and I believe over the long-term it could be a good blue chip to own for the long term.
