Getting Organized: Financials + REITS
Financials are my least favorite sectors. It is ok to have a group/sector that you almost completely ignore. Value investing does not combine well with leverage, and financials are almost always leveraged. I worked for a big bank that first sold at 1.5x book, then it sold for book, then it sold for .5x book, and then it disappeared into a government bailout. I proceed with great caution in this sector. I trust almost nobody.
I am kind of interested by the Axis Capital idea.
Of course, my favorite is the pawnshop owner FirstCash (the JPM of the 2030’s). FCFS - $118 - are great operators, but I worry about their POS (Point of Sale)) business.
My favorite financials in order:
MidWestOne - MOFG - $29 - small Iowa bank (mkt. cap $450 million) , 80% of book, there are 50 just like this one, take your pick
Cullen Frost - CFR - only long-term conservative bank I know, 13x earnings
RenaissanceRE - RNR - the best in a tough industry to understand, 1.4x book
EZCORP - EZPW - $12, small cap pawn shop, 80% of book
Lazard - LAZ - $49 - my favorite broker, needs more M&A activity
Lincoln National - LNC - $32 - 80% of book, life insurance is difficult to understand
Axis Capital - AXS - $80 - specialty insurance, new buy of First Eagle, need to learn more, Barrow Hanley also owns some, Victory just bought some. Wow, hot stock.
Webster Financial - $47 - Conn. Bank 9x earnings, 1x book, the Diamond Hill guys like this one. OK I will do some more work
Federated Hermes - FHI - $34 - money market funds are back, why are these guys not benefiting??
Western Union - WU - $12 - special situation, needs more work
CME Group - CME - $214 - getting a new competitor in t-bond futures
Art Gallagher - AJG - $291, favorite insurance broker, too expensive
M&T Bank - MTB - $170 - Buffalo bank, second favorite regional, if you pointed a gun and forced me to buy a bank it would be MTB, Barrow owns
Chubb - CB - $282 - only PC company that actually pays claims
Goldman Sach - GS - $507 - the world was a better place when this stock was under $100, GS tried every day of my career to disrupt the “soft dollar” commission market, yes I hold a grudge.
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I hate the REIT structure, but it does stop companies from doing stupid stuff. There are some decent business models in this group.
My favorite REIT is Rayonier - RYN -$30 - because I think they have done well in the real estate development business, and the timber business is a solid base.
Alexandria Real Estate - ARE - $118 - labs for big pharma, smart guys
Empire State - ERST - $11 - commercial RE, yikes
CubeSmart - CUBE - $51 - some of the value folks own this, I am a customer, too expensive right now
Lamar Advertising - LAMR - $124 - billboards
Stag Industrial - STAG - $40 - smart guys in warehouses
Ryman Properties - RHP - $109 - Opryland, resorts
Sun Communities - SUI - $134 - well run trailer parks and marinas
Weyerhauser - WY - $30 - the bigger timber company, Rayonier is better
VICI Properties - VICI - $33 - casinos, MGM
Starwood Property - STWD - $21 - Sternlicht is always insightful, 9% yield if you trust Barry