Going to the Dentist - FirstCash Holdings - FCFS
Every once in a while you just have to suffer the pain, and look at some financials. I hate the opaque balance sheets and the unseen leverage. But, the top 6 names below deserve more work, but lets’s wait for the quarters to be reported.
My bailout financial stock has been FirstCash Holding - FCFS - $111 - the largest pawn shop operator. They reported a strong quarter, raised the dividend 9%, and bought back significant shares in the quarter reported July 25. Credit losses were reasonable in the Point Of Sales financing operation, but this business still scares me. FCFS has continued to open new stores and make small acquisitions. Latin America operations were ok. Gold prices continue to help. What does it say when the only financial institutions I trust are pawn shops?
Things are almost TGTBT at FCFS. This is a problem for value investors. When times are good, we get nervous too quickly. FCFS will be a good learning experience.
I am still scared of the big banks exposure to commercial real estate. So far, the losses remain hidden. The SVB fiasco was only 16 months ago, it seems like five years. Many of these financial stocks are up 50% this year. I was really getting interested in my small Iowa bank, but now it is up 40%..
Will I have the courage to jump in when credit losses mount? I doubt it, but I will go to the dentist once a quarter and check on these stocks:
Western Union - WU - $13 - is this a Trump stock or a Harris stock? observe closely, wait for the election
Lincoln National - LNC - $32 - the classic value name, low expectations, but I just do not understand the business. Maybe annuities (70% of the business) are making a comeback? Let’s watch the quarter.
RenaissanceRe - RNR - $223 - this is what I want to own when it gets cheaper, great operators, difficult but not impossible to understand
Federated Hermes - FHI - $35 - money market funds are back, top flight marketing operation, these are the guys we sold Prudent Bear to, very cautious culture, need to study more, should be doing better
Paypal - PYPL - $58 - probably just old technology, waiting for other value guys, Mason Hawkins a recent buyer
Lazard - LAZ - $48 - doing pretty good without much investment banking business, Mason Hawkins a seller
MidWestOne Financial - MOFG - $29 - a 40% run in a month, wow, pass - small cap Iowa bank
EZCORP - EZPW - $10 - the small cap pawn operator, not the quality of FCFS
Cullen/Frost Bankers - CFR - $120 - my favorite ultra-conservative bank, still expensive
Art Gallagher - AJG - $284 - my favorite company, in my favorite industry, insurance brokerage, always too expensive
CME Group - CME - $198 - new competition just starting, monitor
Old Republic - ORI - $33 - will not chase it at a high
Willis-Towers - WTW - $283 - maybe the cheaper insurance broker, a value at some price
M&T Bank - MTB - $175 - my second favorite regional, too much RE risk
UMB Financial - UMBF - $99 - hidden value in their mutual fund processing business
Chubb - CB - $270 - my favorite insurer, but has run to far
Allstate - ALL - $169 - never have understood auto insurance
Charles Schwab - SCHW - $67 - a battleground stock that some smart value guys own
Jefferies Financial - JEF - $57 - my favorite small investment banker
Morgan Stanley - MS - $104 - will Lina, my darling, ever allow mergers again?