BCH

Asset Managers: Capital Retention In the Name of Capital Preservation

by

In recent years, the operating theme for many asset managers has shifted to capital preservation, particularly in their efforts to serve the large and growing number of baby boomers and commercial clients managing pensions. This is a reasonably expected change when considering that many investors lost a significant amount of capital during the Financial Crisis, many of which are still recovering. The ramifications of the credit crunch have led to requirements for increased transparency and regulatory compliance, adding structural costs to the asset-management business model, but this is only one side of the coin. The volume of investable assets is set to increase to a whopping $102 trillion by 2020 from ~$64 trillion today, fueled by an increase in the … Read more

Valuentum Economic Castleâ„¢ Rating Update

by

Read: Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating The Economic Castle Focuses on the Magnitude of Economic Value Creation The Valuentum Economic Castle™ rating is an enhancement of the competitive advantage framework (commonly known as economic moat analysis) that has become widespread and ubiquitous within the investing world. Whereas an economic moat framework evaluates a firm on the basis of the sustainability and durability of its competitive advantages, Valuentum’s Economic Castle™ rating evaluates a firm on the basis of the firm’s future economic profit spread (return on invested capital less its weighted average cost of capital). The companies with the strongest Valuentum Economic Castle™ ratings are poised to generate the most economic value for shareholders in the … Read more

Surveying Fourth Quarter Performance at the Money Center Banks

by

Let’s examine a number of reasons why we don’t prefer banking entities and take a look at recent performance from industry constituents. A challenging rate environment and declining mortgage originations offer key headwinds.

The Mortgage Refinancing Boom Could Be Ending

by

Early Wednesday morning, the Mortgage Banker’s Association (MBA) announced that refinancing activity declined 20% from one week earlier. Adjusted for the Labor Day weekend, total mortgage applications dropped 13.5% from the previous week. Consistent with the dramatic upward movement in interest rates, refinancing activity is down 71% since it peaked during the week of May 3, 2013. Why Do We Monitoring Refinancing Activity? When homeowners refinance, a couple outcomes can occur that pump more dollars into the economy. First, with a refinanced mortgage, owners may choose to take equity out of the home, allowing for large purchases like vehicles or even home remodeling. CoreLogic recently reported that 2.5 million more residential properties have returned to positive equity in the second quarter … Read more

Nelson: The 16 Most Important Steps To Understand The Stock Market

by

A previous version of this article appeared on our website July 21, 2013. Refreshed and updated throughout, as of July 2018. By Brian Nelson, CFA After earning my MBA at the University of Chicago Booth School of Business and training stock and credit analysts from large organizations over the past decade or so, I have heard just about every question (though I admit I am still surprised by many things and remain a very humble student of the markets). I’ve also spent years perfecting the discounted cash flow process for large research organizations such as Morningstar and studied under one of the most famed aggressive growth investors of all time, Richard Driehaus. My knowledge runs the gamut from value through … Read more

Primer on the Banking Sector: Where Are We in the Cycle?

by

Image Source: GotCredit Three of our favorite banks are JPMorgan Chase, Bank of America, and US Bancorp. These are three very high-quality institutions which are also very well managed. They all benefit from cultures that encourage the right kind of risk/reward thinking. If these equities start to trade at a meaningful discount to our fair value estimates, they may be are worth considering as long-term investments, in our view. Summary We’ll talk about how banks make money, and the three most important costs of running a bank. The Great Financial Crisis revealed the tremendous risks of banking equities, and we’ll walk through these in depth. We’ll discuss how to conceptualize where we are in the banking cycle, and how that … Read more

Dividend Increases/Decreases for the Week Ending March 27

by

Below we provide a list of firms that raised their dividends during the week ending March 27. The dividend reports of covered firms on this list will be updated shortly with the new information. To access our dividend reports use the ‘Symbol’ search box in our website header. Firms Raising Their Dividends This Week AT&T Inc. 4.750% PFD SER C (T.PC): now $0.2408 per share quarterly dividend. AT&T Inc. 5 DEP RP PFD A (T.PA): now $0.3125 per share quarterly dividend, was $0.1701. Bancolombia (CIB): now $0.751 per share quarterly dividend, was $0.3000. Centerra Gold Inc. (CAGDF): declared CAD 0.04 per share interim dividend, was $0.0285. Future Fuel (FF): declared $3.00 per share special dividend, was $0.06. Healthcare Trust, Inc. … Read more

Why We Don’t Like Dividends of Banking Firms: 4 Very Good Reasons

by

Untermyer: Is not commercial credit based primarily upon money or property? Morgan: No, sir. The first thing is character. Untermyer: Before money or property? Morgan: Before money or anything else. Money cannot buy it … a man I do not trust could not get money from me on all the bonds in Christendom. –Mr. JP Morgan’s testimony before the Pujo Committee (questioning from Samuel Untermyer), 1912-1913 Reason #1: A Bank Run Is Always Possible Though the history of banking dates back to as early as 2000 BC in Babylonia, the makings of the present-day banking system in the US really didn’t take hold until the beginning of the 20th century. Some financial historians may argue for a later date, but we … Read more

ICYMI — Video: Will Hasty Policy Facilitate the Next Leg Down, or Do We Have It Coming Anyway?

by

President of Investment Research and award-winning author of Value Trap: Theory of Universal Valuation Brian Nelson explains how US policymakers are stuck between a rock and a hard place, and how the market may be factoring in too high of a probability of a return to normalcy before 2021. This and more in the latest video report. Summary Make sure you review Value Trap on Amazon. Do so here. We think those that bought equities near the bottom of this swoon may be looking to take profits at present levels. The market is currently reflecting an 80%-85% probability of a return to normalcy before 2021, which we believe is too high at this time. Our main concern is that government … Read more

4 Very Good Reasons Why We Don’t Like Dividends of Banking Stocks

by

Untermyer: Is not commercial credit based primarily upon money or property?Morgan: No, sir. The first thing is character.Untermyer: Before money or property?Morgan: Before money or anything else. Money cannot buy it … a man I do not trust could not get money from me on all the bonds in Christendom. –Mr. JP Morgan’s testimony before the Pujo Committee (questioning from Samuel Untermyer), 1912-1913   Image: Bank Run in Michigan, USA, February 1933. Source: Public Domain. By Brian Nelson, CFA It’s sometimes easy to lose sight of the fragility of a banking firm’s business model. Let’s examine the reasons why we don’t like banking firms’ dividends. Reason #1: A Bank Run Is Always Possible. Reason #2: Others Have Tried to Invest in Bank Dividends and Have Failed. Reason #3: … Read more