“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” – Henry Ford
The third pool of similar investments used with the Investment Fund is banking. Banking is a highly regulated industry, governed by the Federal Reserve, and thinly capitalized in comparison to other industries. The balance sheet is strongly weighted with current assets and liabilities. It is rare for the stock to trade at more than 1.5 times traditional book value. The top three key performance indicators are 1) the spread between interest earned and interest paid; 2) revenue from non-interest sources; and 3) the quality of the loans issued.
There is different tack taken with reading and interpreting a bank’s set of financial statements. The articles that follow in this area explain the respective interpretations of financial reports; how to key in on important bits of information; and how to properly set the buy and sell points for the respective member stocks.
The key advantage of bank stocks is the increased volatility of the stock’s price. In general, the stock’s price for banks vacillates at a higher frequency than the other two pools of the Club’s Investment Fund. This allows for short-term opportunities to fill the voids when holding cash. There is an in-depth explanation of this business principle in the articles below.
In order to access the articles, models, spreadsheets and tutorials related to the banking pool, you must be a member of the Value Investment Club. To join, go to the Membership page on this site (located in the value investing tab in the main menu above).
Value Investing Episode 1 – Introduction and Membership Program
Below are articles related to the banking pool. Only the excerpts are available to non-members. Full access to the respective article requires membership status.
Bought 400 Shares – Wells Fargo
On 03/15/23 at 3:10 PM, the Fund purchased 400 shares of Wells Fargo. The Fund used the proceeds from the Comerica sale to buy into a position with Wells Fargo. The Fund paid $39.51 per share including transaction fees of $1 per share. Total investment was $15,804. The Fund now ...
Sold Comerica Bank Two Hours Later
One of the advantages of value investing utilizing pools of similar stocks from a single industry is that every now and then, like once a decade, a unique opportunity will present itself to take advantage of the knowledge and hard financial analysis work one does. In this case, it happened ...
Bought Comerica Bank
Today, the Value Investment Fund took advantage of the chaos in the banking industry and purchased 1,200 shares of Comerica Bank after the the share price dropped below $30 per share. Purchase occurred at 10:15 AM. Total cash requirement including the $1 fee per share was $37,188.00. The Fund used it’s margin account ...
Sold Wells Fargo Position
Yesterday at 10:17 AM, the Value Investment Fund sold its position in Wells Fargo in preparation for two sets of PUTs that the Fund will have to comply with the terms of the PUT contracts.
Earlier this year, the Value Investment Fund sold two separate batches of PUTs in Essex Property Trust. One ...
Yesterday, May 3rd, 2022, the Value Investment Fund sold 246.9135 PUTs on JPMorgan Chase & Co. with a strike price of $80 per share. These PUTs expire on June 16, 2023 (13 months). The Fund sold the PUTs for $2.76 each and netted $1.76 each after fees. Total realized income was $434.57 (246.9135 * $1.76/ea).
Overall, Bank of New York Mellon is in good financial condition and even with the adjustment for a reduction in revenue tied to Russian transactions, the bank will regain market value once the entire market shifts towards a positive position in comparison to the various index values on 12/31/21. However, the current market price is ...
One year ago on January 12, 2021, the Value Investment Fund purchased its first tranche of Wells Fargo Bank. At that time, shares were purchased for $33.24. In addition, financial analysis stated that the price per share would recover to about $53 per share within a year assuming the Federal Reserve would lift its growth ...
Financial institutions, including banks, are highly regulated, extremely leveraged, and susceptible to interest rate fluctuations. Due to this unique exposure, calculating intrinsic value for bank stocks requires modification of the most popular valuation models. There are about five widely accepted intrinsic valuation models used with determining the core price for stock of most companies. Novice ...
The banking pool of the Value Investment Fund purchased 232.9373 shares of Bank of New York Mellon Corporation trading at $41.93 at close of business on Friday January 22, 2021. Total investment is $10,000 for 232.9373 shares at $42.93 including a $1 per share exchange fee.
After careful analysis, it was determined that the bank’s stock ...
The Value Investment Fund purchased a second tranche of Wells Fargo Bank shares today, January 14, 2021, at 12:45 PM. Total investment is $20,000. The price per share including a $1 per share transaction fee is $35.78.
This particular investment is a part of the Banking Pool for the Club’s Investment Fund. The stock is currently ...
