tnathan

ADSK - the management team is a little clueless but its a great asset that is doing well being sold off for reasons not core to the business

SMART - this is going back to book when they start buying back all the shares

SN, FFBB, UBAB

ADM - I think the market cap reaction is too much for what is likely a small misstatement...stock will be under pressure until investigation is done. WABC - Bank with potentially the best deposit base in the country. 2x tbv is cheap for this -> typically trades at 3x+ tbv given how consistent this bank is. Mostly a levered bond shop and not a traditional lender so doesnt have as much risk as other banks (only duration risk, which has hurt, but doesnt matter as much for them given the low cost deposits)

People can hate on Elon for being a weirdo and really full of himself, but idk how you could call the initial 2018 share package a mistake. The stock was trading in the $20s back then and has since 10Xed. So yeah, he's got a huge ego and a lot of the success can't just be chalked up to him, but give credit where it's due. This is not about cow-towing to CEOs vs. withholding from normal employees. The guy is special at what he does and the results speak for themselves. He might be "distracted" but he still 10xed the shares so its a bad argument. I'm sure the next time he asks for shares he will again have to have proved that he has produced results, or he won't get special treatment

Thanks all!

APPF - this is in the same bucket as my PCOR and ADSK that I've been building. Might not be the fastest grower, but the runway is so long within the SMB segment and APPF's ability to move upmarket and challenge inferior competitors in the enterprise segment will ensure this is eventually a $20B stock. Don't know when it'll happen but it will.

Does anyone know of any fundamental funds / investment managers in Chicago that they greatly respect? Funds that don't try to play quarterly earnings, that are truly trying to do quality research and understand the businesses they are buying. No need for it to be something super big.

Bought a lot of WABC, OFG, and PTLO

As an overall note, the earnings of regionals / community banks has been super variable and not surprising. Banks with variable rates loans and relatively strong deposit franchises have been able to keep or expand NIM, while banks that screwed themselves with long term fixed rate securities / loans are essentially screwed for the near term. Some have been biting the bullet and selling securities in order to get into more rate sensitive assets, but it's not totally clear if that is the right strategy at this point (especially if rates start to come down and then you get screwed again if you don't lock in longer term). If you do own banks, it is well worth owning specific stocks and not the KRE etf (or similar) given the difference in performance across the sector. The market has clearly rewarded strong performers, but has also rewarded weak performers, which suggests a lot of the moves in the recent weeks are etf driven. I am buying more OZK, which I've been buying for the past couple months - the results are really incredible and it's not being valued as it should. Great management team as well that is stepping into some of the market paralysis and using excess capital to take share. I think generalist investors are throwing every bank with construction loans out which is not fair to best in class orgs.

This is another great read laying out the broader India investment case. I also happen to be in India at the moment (here for a month traveling) and you can feel the energy in the people. As much as the government has problems, it’s clearly making positive investments and spending money in areas that will boost the economy, and people here want to succeed. In many ways I think the positive energy represents what the US has lost in recent decades. https://www.dispatchesfromindia.com

Sorry edited - meant to type NIB "non interest bearing"

I didn't dig overly deeply into the loan portfolio but it has a higher portion of non interest bearing deposits than some of the other large regional banks, it seems like their management has been more thoughtful about the move up in rates vs. other management (which to me makes me more confident in their ability to stay flexible in what will be turbulent times). Perhaps the commercial real estate exposure starts to bite them, but I still think their overall profile is more attractive (even more so when you take into account the lower valuation)

I strongly agree that the most important metric right now is understanding the deposit base of specific banks. When we think about book value, the deposit base composition is not included directly in the calculation, but we really should be thinking about it in the same way (just in the reverse) as we are thinking about the mtm losses on the security / loan portfolios on the asset side. Low cost / NIB deposits are worth a TON in this environment, and there are some banks (very few) which have an outsized advantage...check out SBCF and PFS for two good examples of smaller banks. I personally would be far less concerned with the lending portfolio right now, as I don't think that has as large an effect on the next few years as the deposit makeup. Banks with the strongest NIB deposits are going to be able to keep some (not all) of their margin profile which will help protect them when we start to seen higher loan losses...whereas I think you'll start to see huge margin compression on other banks that might screen "cheaper" at the moment over the next year and therefore might not be cheap at all

Potentially no actual reason. Could be a general feeling that it’s risky left over from 08 era. Clearly the growth has been great recently.

Piggybacking off the regional bank thread, does anyone have any smaller cap banks that are top picks? I am looking at SBCF - seacoast. Good growth given Florida location, doesn’t have the asset maturity issue to the extent other banks have, key metrics have expanded over time. Are the loans they are making very risky? Florida real estate makes me concerned but perhaps not nearly as risky as it was in 08.

M&T is the pick for me. Seems they didn’t overextend on the maturities and it trades cheaper than the others.

This is great thanks guys!

What is the easiest way to get leverage on a bond trade? Such as, if I wanted to make a bet that short term treasury yields will be <3% within 2 years, is there a smart way of doing this using options on short term treasury etfs?

Put on a pair trade - short arkk (via SARK) and then bought DIA...Unless we really have a crazy run here I think this works out well. Does anyone disagree? Open to feedback!

A few picks: BIG & MATV. Both of these stories are essentially margin recovery plays that have been beaten up due to what I believe are transition quarters related to inflation. Margins should recover for both of them over the next 4-6 quarters. Edit: Also adding on GRFS. They seem to be getting much more serious on the investor communication piece (it is family owned) and more focused on the business. The plasma market had a huge shortage during COVID - this should normalize moving forward and they will be able to pay down their massive pile of debt over time. The market itself is extremely attractive and a secular grower...they are in an oligopoly with a long runway, and if the business gets managed better over time you can see huge margin expansion here and with the debt paydown it could springboard higher.

March '23 VIRT $26 calls...I think this has a decent chance of another huge run up at some point next year if we see any kind of volatility.

Would also add things like the aggregates businesses here (VMC, MLM)...volume is set by market demand which fluctuates, but there is no substitute and the market is so localized (it's not economical to transport rocks long distances) that pricing power is immense, assuming all local queries are acting rationally (not always the case but as the big players get more share over time it is becoming that way).

Thanks for the insight everyone...looking forward to the Wells update @dealraker. I did a bit more reading on Goosehead and it does seem like they have a very interesting / differentiated model with a potential for 10+ years of strong growth runway. What is the general bear thesis (apart from valuation)?

Does anyone have some good reading on the dynamics in the insurance brokerage industry? What differentiates these stocks? Over the past bunch of months we have seen relative underperformance from BRO vs. all the other major brokers. Why would this be?