Another confirmation bias post. Glenn Greenberg of the Brave Warrior Fund was on CNBC stating their case to be long financials. Market Folly has the notes.
– Long financial stocks JPMorgan (JPM), Primeria (PRI), and Charles Schwab (SCHW). “We made a big bet that normal interest rates would not stay at zero. It was that simple and we didn’t know when they would change, but the payoff we felt would be substantial so we have had a lot of financial stocks in our portfolio the last few years.”
– On JPM: “They should be earning $8-9 in a couple of years if rates track at the moderate increases that are in the dot plot (of the Federal Reserve).”
– On SCHW: “Amazing franchise” and sees it largely as a bet on interest rates normalizing … 175 bps now versus 350 bps back in 2007 on client cash positions.
We currently own JP Morgan and we first bought it over 3 years ago.
Charles Schwab has been on our watch list for a year now. It finally started raising its dividend again. Which we were waiting for. The drawback in waiting is the share price appreciated and the current dividend yield is below what we would like. If the dividend yield gets closer to 1% either through a sell-off or further dividend increases we’ll most likely be an active buyer at that time.