Please be inclusive and welcoming to everyone, regardless of their background, experience, or opinions.
- Manlobbi
Halls of Shrewd'm / US Policy❤
No. of Recommendations: 0
No. of Recommendations: 4
Snip from that blog post:
After opening a position in COF last quarter, Berkshire tacked on another 2.5 million shares in Q2.
Back in July, I linked to Berkshire director Chris Davis's recent interview with Barron's ' in which he laid out his bull case for the bank holding company. Here is what Davis had to say'
"Capital One has been a fintech company since the start. It uses data science to market financial services. It is still run by its founder, Richard Fairbank. The bank pays a high rate on its deposit base. It is a big issuer of credit cards ' primarily to working people, not big spenders. The best analogy is Progressive, a data-science company disguised as an insurer. Progressive realized early on that there is no bad risk; there is only bad pricing.
"Capital One has matched its loans to its deposits. At around $100 a share, it is trading right around tangible book value, for a business that has had a low- to mid-teens return on equity for 35 years."
Does anyone have any thoughts on Capital One Financial (COF)?
Current price about $107.
As with most financials the temptation is to put it into the "too hard" pile, but Berkshire is a better source for stock ideas than the average CNN show
Jim
No. of Recommendations: 8
Have been a customer of COF, using their cash rewards credit cards and online savings till a couple of years ago. I agree they are very well run. Have had them on my watchlist but never pulled the trigger, since I already owned a big position in Amex.
The well run credit card companies like Amex, COF and Discover have been much better investments than the big banks Buffett favors. Give me a COF any day over BAC or WFC, both as a customer and as an investor.
A mid size bank looking extremely attractive is EWBC which caters primarily to the well-heeled Chinese and other Asian diaspora in California and has a banking franchise in China. Is one of the most cost efficient banks, with ROA = 1.85% and ROE of 20+%. Was clobbered along with most mid size banks in California following SVB bankruptcy. It is down about 30% in the last year and is currently trading at a forward PE of 6.7. Too small for Buffett, but not for the rest of us.
No. of Recommendations: 2
Does anyone have any thoughts on Capital One Financial (COF)?I made this post on COF on the falling knives board back in Feb of this year:
https://www.shrewdm.com/MB?pid=574469564Not much data in the post, just a customer's view who thought it seemed attractively priced at the time, but sharing for what it's worth.
It was amazingly poor timing to suggest a bank stock, considering the banking turmoil started only about a week later as I recall.
The stock is currently about 2.5% below the price at the time of posting.
No. of Recommendations: 0
No. of Recommendations: 2
Not much data in the post, just a customer's view who thought it seemed attractively priced at the time, but sharing for what it's worth...
That post mentions that it was trading at around 6 times earnings.
Their earnings vary a bit, so an occasional odd number isn't by itself a surprise:
2019-2022 earnings per share were $11.02, $5.19, $26.84, $17.91...definitely something for which a fancier metric is needed!
What surprised me more is that Value Line thinks that they'll [still] be trading at an average annual P/E of 6.5 in 3-5 years, despite earnings almost doubling from the current dip.
Since it's a longer term forecast, it is presumably based on the notion that earnings will be neither unusually high nor unusually low in that future stretch...so 6.5 is a very downbeat assumption for cyclically adjusted earnings.
Go figure.
I have no idea if the various forecasts hold water, and I certainly have no record of making money in the credit card business.
But the forecast seems to be for a business that will in fact do well but whose stock won't really rise in price.
That's just fine for a very long hold for someone like Berkshire. But annoying for mere mortals!
There is a 2.17% dividend to tide you over, I suppose.
Jim
