Against the Crowd: Benj's Best Bank Bets
Benj Gallander looks for stocks that he expects will offer significant appreciation over multiple years. Here, the editor of Contra the Heard, looks at a trio of small-cap US banks and a favorite large-cap play for patient investors willing to go against the crowd.
Steven Halpern: Joining us today is Benj Gallander, editor of Contra the Heard. How are you doing today, Benj?
Benj Gallander: I’m doing very well, Steven. How about yourself?
Steven Halpern: Very good. Thank you for taking the time today. You’re well known as an expert in value investing and you often go counter to the Wall Street crowd. Can you tell our listeners a little about your long-term investing strategy?
Benj Gallander: We’ve been doing this for well over 20 years and we invest in companies that are out of favor. When companies are beaten down and we feel that they have the chance to return to their previous form—and we look at gains of 100% plus, often 200%, 300%, 400%—that’s when we look to buy.
Of course, it’s not just based on the past stock price. We also look at financial ratios, debts, the management, that kind of thing. It’s very important to us, though that we really feel the company is indeed in a turnaround, and again, we’ve been doing it for a long period.
Steven Halpern: That type of approach often takes patience because you’re waiting for some change in the company that isn’t yet recognized on Wall Street.
Benj Gallander: Yes, that is very true indeed. Our average hold time, last we looked, was about three and a half years. Some companies we’ve held for over ten years. I remember Service International and Stewart Enterprise in the funeral sector, but again, both clocked in with huge gains of 300% to 400% and it proved worthwhile, plus they were kind enough to pay us a dividend while we waited.
Steven Halpern: Now one area you’ve been particularly bullish on for a while is the American banking sector. Before we look at any individual names, could you first share your general thoughts on the outlook for financial stocks in the US?
Benj Gallander: We started buying into financial stocks big time around 2009. We’ve noticed that every ten years, or so, the banking system mistakes, gets into trouble, and the stocks are badly beaten down.
One that you and I have talked about before was Fidelity Southern (LION) that we bought for $3.32. We sold it at 18.74, so it was a gain of 450% plus dividends.
There are numerous other companies in the sector that we bought and we think if interest rates go up, that will help the banking sector. It has in the past, so we should see some improvements to the bottom line because interest rates will indeed go up in the United States.
Steven Halpern: You’re particularly bullish on a trio of small-cap bank stocks.