2502 N. Rocky Point Drive, Suite 665
Tampa, Florida 33607
2502 N. Rocky Point Drive, Suite 665
Tampa, Florida 33607
Financials Pilecki Reprint… Read More
One of the top contributors to the Fund in Q4 was a newly purchased position in Robinhood Markets. We understand this may surprise some of our partners as a money losing, VC-funded financial technology company appears to conflict with our investment history of preferring highly profitable companies with low valuations. We had followed Robinhood for several years before purchasing shares. In fact, we shorted the stock from December 2021 to April 2022. We continued to follow the stock and …… Read More
Garrett Brooks: Good afternoon everybody, and thank you for joining us. My name is Garrett Brooks with Slingshot Financial. We are a Colorado registered investment advisor and your institutional representative for Gator Capital Management. With me this afternoon, happy to have the man, the myth, the legend himself, Derek Pilecki, Managing Member of Gator Capital Management and Portfolio Manager of Gator Long Short. Gator Long Short … Derek Pilecki: Hey Garrett. Garrett Brooks: … if you remember – oh, hey …… Read More
The Fund’s largest position is First Citizens Bancshares (“First Citizens” or “FCNCA”). We acquired our stake over the past three years. Initially, we owned and traded around a small position in CIT Group Inc. (“CIT”) during the summer of 2020. We felt CIT was undervalued and management was making progress in reducing risk during the Covid-19 pandemic. In late 2020, CIT agreed to be acquired by First Citizens. We added to our CIT stake the morning of the acquisition announcement …… Read More
Garrett Brooks: Good morning everyone. Thanks for joining us on this summer Friday morning. My name’s Garrett Brooks with Slingshot Financial. Slingshot is a Colorado registered investment advisor and we serve as an institutional representative for specialized investment managers, including Gator Capital Management. Excited this morning to have Derek Pilecki. Derek is the managing member at Gator Capital Management, the firm that he founded back in 2008. He’s the portfolio manager for Gator Long/Short, which is the flagship portfolio there …… Read More
Bill: Ladies and gentlemen, thrilled to be joined by Derek Pilecki of Gator Capital. If you don’t know who he is, you will shortly. And Derek, thank you very much for making the time. Derek Pilecki: Thanks for having me on, Bill. Bill: I think it only took me about three years of reading your letters and then listening to a podcast where I think I understand the name Gator now. And correct me if I’m wrong, but it symbolizes …… Read More
A second but higher risk opportunity is in select regional banks. Coming into March, regional banks were already at the low end of their long-term valuation range. In March, the regional bank index declined 29%, and many well-run regional banks declined more than the index. We admit there are many new negatives for regional banks in the aftermath of the Bank Crisis. Still, we think they have become too cheap and have the potential to outperform as we get clarity …… Read More
We see two main opportunities in the aftermath of the Bank Crisis of March 2023: 1) non-bank financials and 2) select regional banks. The best near-term opportunity is non-bank financials. The whole financial sector was down 10% in March. For comparison, regional banks were down 29%. Several of our favorite non-bank financials were down more than 15% despite having little in common with regional banks. These non-bank financials don’t have bank deposits and are not facing increased regulatory scrutiny. We …… Read More
The bank run by depositors on Silicon Valley Bank (“SIVB”) was shocking. After the bank announced an equity offering and the sale of a portfolio of mortgage-backed securities (“MBS”) on March 8th, depositors withdrew $40 billion in a single day on March 9th and made requests to withdraw another $100 billion on March 10th. Since SIVB did not have enough cash to meet these depositor requests, bank regulators shut down the bank the morning of March 10th. SIVB went from …… Read More
Garrett Brookes: Good afternoon everyone, and thank you for joining us. My name’s Garrett Brooks with Slingshot Financial. Slingshot is a Colorado registered investment advisor. We also serve as a fee-based representative to institutions for specialized investment managers. And I’m very excited to have with us today our partners at Gator Capital Management. Joining me is Derek Pilecki, the founder of Gator Capital Management, the firm which he founded in 2008. He’s currently the portfolio manager for the firm’s long …… Read More
Several preferred stock issues of different mortgage Real Estate Investment Trusts (“mREITs”) appear attractive. mREITs had a very difficult 2022 because mortgage spreads widened significantly. Mortgage spreads widened because the Federal Reserve stopped buying mortgage-backed securities (“MBS”) as part of their Quantitative Easing Program. Since mREITs own MBS on a leveraged basis, when mortgage to-Treasury spreads widen, the book value of mREITs decline. Also, higher interest rates are a headwind for mREITs and their related preferred issues. In September 2022, …… Read More
We are short the shares of several Office REITs. We believe the demand for office space will stay very low as the workforce adjusts to hybrid working conditions. Most office leases are multi-year leases. As these leases burn off, we believe companies will demand less space. We think this presents a long-term problem for owners of office space as the demand for future office leases will be materially lower compared to pre-pandemic. We think it’s difficult to see how much …… Read More
We started a new position in Carlyle Group (“Carlyle”) during Q4. Carlyle is a name-brand private equity firm. We like the private equity business because 1) the sector is taking market share with investor portfolios, 2) the business results of private equity firms are asymmetrical in bull markets versus bear markets, and 3) the locked-up client capital is more durable than traditional investment managers. Carlyle’s stock had a tough 2022. Private equity firms had very strong years in 2020 and …… Read More
We believe the opportunity in growth regional banks remains compelling. We believe investors are missing three things by not buying regional banks at these valuations: 1) margins may widen or shrink, but they will settle down once the Federal Reserve (the “Fed”) stops raising rates, 2) loan growth is very good and is the main earnings driver over any time period greater than 2 years, and 3) loan credit quality is likely to be better than sell-side estimates for 2023 …… Read More
We have owned a position in Axos Financial for 2 years, but the stock is off 37% from its high in early 2022. We think Axos is a good example of the opportunity in bank stocks right now. Axos has strong organic growth. It has low credit losses and will benefit from higher rates. No company specific issues have materialized in 2022 to explain the stock decline. Here is our investment thesis on Axos Financial: Management – Greg Garrabrants has …… Read More
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We own positions in both Enact Holdings and its parent company, Genworth Financial. Enact is one of six mortgage insurance companies. Mortgage insurance is purchased by borrowers to protect lenders if the borrower defaults on their mortgage. The government mortgage agencies (“GSEs”) require mortgage insurance when the borrower has a down payment of less than 20% of the home’s purchase price. Usually, first-time homeowners are the largest users of mortgage insurance since they often have the most difficult time accumulating …… Read More
We like Realogy Holdings (“Realogy” or “RLGY””). Realogy is the parent company of Coldwell Banker and Century 21. We believe the Coldwell Banker name has significant brand value among residential real estate owners. Realogy trades at only 4.4x EBITDA. We think stock market investors are overly concerned about disruption of residential real estate brokerage. Street estimates are too conservative – We believe Wall Street estimates for Realogy in the next 2 years are too conservative because they assume that Q2 …… Read More
Robert Kraft: This podcast is for informational purposes only and is not an offer or solicitation of an offer to buy or sell securities. SNN Network, SNN Inc, and the Planet MicroCap Podcast, and the representatives are not licensed brokers, broker/dealers, market makers, investment bankers, investment advisors, analysts, or underwriters. We do not recommend any companies discussed, we may buy and sell securities in any company mentioned, and may profit in the event those securities rise in value. We recommend …… Read More
One of the new small bank positions that we purchased for the Fund is in Esquire Financial Holdings (“Esquire” or “ESQ”). Esquire is a bank headquartered on Long Island, focused on serving the banking market for attorneys. By the nature of their business, attorneys often have control of money in escrow accounts for the benefit of their clients. These escrow deposits are attractive to banks because they tend to be sticky and not rate sensitive. Attorneys also have borrowing needs …… Read More
We believe Canadian banks are attractive relative to US banks right now. Canadian banks are as cheap as they’ve been compared to US banks in the last 20 years. The Canadian banking system is an oligopoly of five national banks. This oligopoly in Canada has allowed the banks “North of the Border” to post higher returns with less cyclicality than their US peers. US banks have had a huge run in the last six months due to investor optimism about …… Read More
JP Morgan Chase (“JPM” or “Chase”) is missing a strategic opportunity by not making an acquisition in the UK. Instead, JPM is entering the consumer banking market in the United Kingdom by creating a start-up digital bank. I believe this is a waste of time and resources for the bank. This digital bank will take decades to impact JPM’s bottom line. Instead, JP Morgan Chase should take advantage of the low valuations among UK banks and acquire Barclays PLC. Acquiring …… Read More
Arlington Investment (“AAIC”) is a mortgage real estate investment trust. AAIC’s liquidation value (or book value) is $5.90, and the stock is trading for $3.66. We don’t think it will return to $5.90 in the near term, but we believe the stock can get to $5.60 (or 90% of the estimated Q4 book value) in 6 to 12 months, which is +53% higher than the current price. The management at AAIC has made strategic changes to increase their liquidation value. …… Read More
BBX Capital (“BBX”) is a company controlled by the Levan family in Ft. Lauderdale. The company has been through several iterations. At various times, it has owned a bank, a home builder, and a timeshare business. The current iteration was formed this past Fall after spinning-off its timeshare business, Bluegreen Vacation Holdings (“BVH”). The remaining businesses in BBX Capital are several real estate ventures located throughout Florida, a building products company focused on windows and doors, and a struggling candy …… Read More
Jonathan Bale: Good morning everyone, and welcome to the Gator Capital Management Q4 2020 webinar. And thank you for joining us. Our Q4 2020 webinar will be presented by portfolio manager, Derek Pilecki. The webinar will last approximately 30 minutes, after which, we will open the floor for a question and answer session. If you have any questions you can submit any time during this session by clicking the Q&A icon on your screen. Due to time restraints, if your …… Read More
Flushing Financial (“FFIC”) is a bank with 20 branches on Long Island. Originally, FFIC was mutual thrift that converted to stock ownership in 1995. The bank has had a long history of strong credit quality, but investors have sold the stock due to COVID-19. We think the valuation is way too low given the bank’s long history of strong credit and incremental changes management is making to the business to improve returns. Strong credit – FFIC has a history of …… Read More
ConnectOne (“CNOB”) is a $7 billion bank with 28 branches mostly in northern New Jersey. ConnectOne has a strong management team led by CEO Frank Sorrentino. The bank has a history of strong organic growth. In recent years, it has become a skilled consolidator of other banks. With the pandemic, investors sold the stock due to general concerns regarding credit risk. We think the valuation is too low given the bank’s history of solid credit and strong growth. Strong loan …… Read More
https://gatorcapital.com/wp-content/uploads/2020/08/Q3-Webinar.mp4 Jonathan Bale: Good morning everyone. Welcome to the Gator Capital Management Q3 2020 Webinar. And thank you for joining us. Our Q3 2020 Webinar will be presented by Managing Member and Portfolio Manager, Derek Pilecki. The webinar will last approximately 30 minutes, after which we will open the floor for a question and answer session. Do you have any questions, you can submit at any time during this session by clicking the Q&A icon on your screen. Due …… Read More
We purchased shares in three publicly-traded Puerto Rico Banks, OFG Bancorp (“OFG”), Popular “BPOP”), and First Bancorp Puerto Rico (“FBP”), during Q2. We believe they represent extraordinarily good values in the current market. We previously owned OFG from 2016 to 2019, so we’ve been familiar with these banks for awhile. The total position size of the three Puerto Rican banks in the Fund is about 15%. Banking consolidation within Puerto Rico – Puerto Rico is on its way to 3 …… Read More
https://gatorcapital.com/wp-content/uploads/2020/02/Q1-Market-Outlook-Webinar.mp4 Alexis Sayers: Good morning everyone. Welcome to Gator Capital’s Q1 Market Outlook Webinar. Thank you for joining us for our first call of 2020. My name is Alexis Sayers, and I am a Marketing Analyst here at Gator Capital. I’m excited to welcome you today to our webinar. Our Q1 Market Outlook will be presented by Managing Member and Portfolio Manager, Derek Pilecki. The presentation will last approximately 30 minutes. We will open the floor for 10 minutes …… Read More
A new trend emerged in bank mergers in 2019: the merger of equals (or “MOE”). While MOEs have been around for decades, few have been announced in the last 20 years. In the late 1990s, there were several famous MOEs such as NationsBank/Bank of America, Norwest/Wells Fargo, Travelers/Citibank, and Chase Manhattan/J.P. Morgan that formed what are now the four largest banks. TCF Financial and Chemical Financial kicked off the 2019 revival of MOEs in January. BB&T and SunTrust followed with …… Read More
https://gatorcapital.com/wp-content/uploads/2019/11/Q4-Market-Outlook-Growth-Banks.mp4 Hi everyone. This is Derek. We’re going to wait a few minutes to get started to let people dial in. Okay welcome everyone. This is Derek Pilecki. Welcome to Gator Capital’s Q4 market outlook webinar. To get started, I’d like to read a disclaimer. The views and opinions in this presentation are solely those of Gator Capital Management. Gator Capital Management has made every attempt to ensure the accuracy and reliability of the information provided, but it cannot …… Read More
Regional bank stocks have had a challenging period over the last 16 months. Since June 2018, the S&P Regional Banks Select Industry Index declined by 18% and trailed the S&P 500 Index by 27%. During this time, the median bank in this index increased earnings by 10%. Banks are expected to continue to grow earnings going forward. Using Regions Financial (or “RF”) as an example of a generic regional bank, RF’s forward price-to-earnings (“P/E”) multiple has declined from 13.6x to …… Read More
SLM Corporation (“SLM” or “Sallie Mae”) is the holding company for Sallie Mae, the largest lender in the private student loan market. We have owned Sallie Mae for three years and wrote to you about it in our Q2 2016 letter when we reviewed our investment theses on several consumer finance stocks. We believe Sallie Mae is an attractive stock at the current price. We understand the reasons Sallie Mae’s stock is cheap and think other investors should not be …… Read More
DOWNLOAD ARTICLE David Solomon became Goldman’s CEO in October of 2018. We have read several articles about his disc jockeying at night clubs.1 These articles make for fun reading especially since this unusual hobby seems so out-of-character for an executive at a company like Goldman. However, none of these articles focus on the opportunity Solomon has to reshape the firm away from the capital-intensive institutional trading Fixed Income, Currency & Commodities (“FICC”) business unit and whether Solomon will act on …… Read More
We started a position in SVB Financial (ticker: SIVB) during the 1st quarter. SIVB is the bank holding company for Silicon Valley Bank, which has a strong franchise providing commercial banking to venture capital firms and their venture-backed investment companies. Over the past 20 years, SIVB’s stock has returned 17.3% annually compared to the S&P 500 returning 5.9% and the bank index returning 2.6%. These returns are a testament to the bank’s strong franchise. Despite SIVB’s strong franchise and great …… Read More
We have held a position in the preferred stock of the Government Sponsored Enterprises (GSEs) almost since the Fund’s inception. The GSEs are Fannie Mae and Freddie Mac, which buy mortgages from banks and package them into mortgage-backed securities (MBS). Fannie and Freddie earn a fee for guaranteeing the credit of the mortgage underlying the MBS they issue. We last wrote about our position in the GSE preferreds in detail in February 2015. There are several recent developments regarding this …… Read More
Our investment thesis in Credit Suisse includes improved capital allocation to higher margin businesses, conservative guidance on future returns, open-ended growth opportunity in wealth management, improved capital levels and potential capital return, improved cost structure, the reduction of legacy costs and litigation leading to improved returns, a low valuation, and the potential benefit of higher interest rates. Tidjane Thiam was appointed CEO of Credit Suisse in 2015. We admired Thiam in his prior role as CEO of Prudential PLC, the …… Read More
We’ve recently added to our position in Ameriprise Financial. We think the current 9.6x forward PE ratio is a very attractive valuation given Ameriprise’s growing financial advisor business. We purchased our initial position in Ameriprise in 2016. In 2016, Ameriprise was trading at a low forward PE multiple of 9.5x due to the risk of the proposed DOL Fiduciary Rule. Ameriprise rallied strongly right after the 2016 Presidential Election on the expectation that the new Republican Administration would reduce the …… Read More
We started a long position in Barclays PLC (“Barclays”) for the Fund in February. Barclays has been a frustrating stock for investors. Over the last five years, Barclays has returned -19% vs. the KBW Bank Index returning 109%. But, we think improved stock price performance could finally be on the horizon for Barclays and hope our purchase will prove timely. Barclays should produce improved returns over the next three years due to its cost-cutting and reallocation of capital within its …… Read More
We own Ares Management. Ares Management is a Los Angeles-based alternative asset manager that alumni of Apollo Management founded in 1997. Ares specializes in direct private lending, but the firm also has significant private equity and real estate platforms. Ares Management is the third-party manager for the largest publicly-traded business development company (BDC), Ares Capital Corporation (ARCC). Here is our investment thesis on Ares Management: We Favor Alternative Managers over Traditional Asset Managers – We also own several other alternative …… Read More
We purchased SLM Corporation (“SLM”) this summer because it was trading at 10x 2017 estimated EPS and is growing its loan portfolio more than 20% annually. SLM is the renamed student loan company formerly known as Sallie Mae. The student loan industry has gone through significant changes over the last 10 years. The industry used to originate a mix of government guaranteed loans and private loans. In 2010, the government ended the program of third-party lenders making government guaranteed loans. …… Read More
We’ve owned shares of OFG Bancorp for a little over a year and have added to our position recently. OFG is the third largest of the publicly-traded banks in Puerto Rico (PR). We added to the position because we believe the bank has improved operations, but the market is distracted by the restructuring of the Puerto Rican government’s (“PR Govt”) debt. Below is a summary of our thesis: US regulated bank – Since Puerto Rico (PR) is a territory of …… Read More
We believe Capital One stock is interesting because it has the best combination of growth and value among the super-regional banks. With its mix of national lending platforms and online deposit gathering franchises, Capital One has the best strategic positioning of super-regional banks. The company is posting the best growth rate among the credit card issuers. The non-promotional management team has been positive about the growth opportunities that they currently see. The company’s stock trades for less than 9.0x 2017 …… Read More
We purchased OneMain Holdings because it was trading 5x 2017 estimated EPS, and we believe it is a beneficiary of consolidation in the consumer unsecured lending business. We believe as the company realizes the cost savings from a recent major acquisition and deleverages through retaining earnings that the stock valuation will improve. OneMain Holdings is relatively new to the public markets, but the core operations of the company have a long history. The private equity firm Fortress Investments purchased AIG’s …… Read More
We’ve owned Voya Financial since its IPO in 2013 and believe it represents an extraordinary opportunity at current prices around $31. Voya Financial is the old U.S. subsidiary of ING, the Dutch insurance company. ING needed a bailout from the Dutch government during the financial crisis. One of the conditions of the bailout was ING had to divest its US operations. So, after renaming the subsidiary Voya, ING sold a stake through an IPO in 2013 and sold off the …… Read More
Colony Capital, Inc. (Colony) is a REIT focused on commercial real estate. In 2009, the company came public as Colony Financial and was a permanent capital vehicle managed by Colony Capital. The company invested in distressed real estate debt and equity. Over time, this opportunistic strategy led Colony to invest in a portfolio of industrial properties and another portfolio of single-family homes. Colony also originates first and mezzanine mortgages for commercial properties. The company is regarded as a sophisticated commercial …… Read More
We believe the equity of Ambac is mispriced due to several factors such as 1) being a post re-org equity, 2) crossover ownership from distressed credit funds who are forced sellers due to redemptions in their funds, 3) being a run-off business, 4) difficult to interpret financial statements; and, 5) valuation dependent on litigation. We also believe there are near-term catalysts that will help unlock value. Background of Ambac Company Description Ambac Financial Group, Inc. (AMBC) is a holding company …… Read More
Business Summary: Re/Max is a high-quality franchised real-estate brokerage business. The company’s revenues are based mainly on the number of real estate agents working under the Re/Max banner. The company is a destination for high-producing agents because it has a higher payout ratio for commissions than competing real estate brokerage companies. However, the company charges its agents a higher-fixed fee to operate under the Re/Max banner. With this structure, real estate agents who have high productivity and are entrepreneurial are …… Read More
Company Background: Janus Capital Group, Inc. (JNS), the well-known mutual fund company, recently hired Bill Gross from PIMCO. We believe this is a transformational event in the company’s history. Although the stock price is up on this news, we believe it does not fully reflect the increased value from the addition of Bill Gross. Therefore, we think JNS’s stock presents an interesting asymmetrical risk/reward opportunity at current prices. Investment Thesis: Hiring of Bill Gross is a transformational event: Bill Gross …… Read More
Company Background: CIFC creates and manages collateralized loan obligations (“CLOs”). CIFC originally went public as Deerfield Triarc Capital in 2005. Prior to the financial crisis, the company used its own balance sheet to invest in equity tranches of its own CLO and collateralized debt obligation (“CDO”) deals. This did not work out well in 2008, and the company suffered serious losses. However, because the company used structured securities instead of short-term debt to get leverage, the company did not have …… Read More
Company Background: One important way Gator Capital is different from other investment managers that specialize in the Financials sector is that our portfolio has a much smaller position in mid‐sized regional banks. The difference in our view is that we are negative on the prospect for widespread banking M&A. Despite more than 7,000 banks still existing in the U.S., M&A activity among banks has been subdued. Through Q1 2013, there were only 44 bank M&A deals valued at a total …… Read More
Company Background: We own warrants in Zions Bancorporation (Zions or “ZION”) for our clients. While the price of the warrants is very volatile, Gator Capital Management believes they present an interesting asymmetrical risk/reward situation that could produce high returns. Gator originally purchased ZIONZ when the Treasury auctioned their holding into the market. Since then, they have added to the position as the Fund has had in-flows. Zions actually has two warrant issues outstanding: ZIONW and ZIONZ. Both are listed on …… Read More
Company Background: Ambac is a monoline municipal bond insurance company. During the 2002-08 timeframe, Ambac wrote credit default swaps on collateralized debt-obligations (or “CDOs”) and insured non-agency mortgage bonds (or “RMBS”). The losses from this diversification forced Ambac to seek bankruptcy protection in 2010. In bankruptcy, Ambac’s debt was converted into equity and the old shareholders were wiped out. Ambac emerged from bankruptcy on May 1, 2013. Post-bankruptcy, Ambac presents an interesting asymmetrical risk/reward situation because of the potential that …… Read More
Despite public statements from the regulator, I believe there is a chance that Freddie Mac can earn its way out of its current indebtedness to the U.S. Treasury. I believe the companies are healing more rapidly than is believed. Their core business is profitable. The 2009-2012 vintages of mortgage originations will be close to pristine. If home prices improve from here, the losses on defaulted mortgages will decline. If employment statistics continue to improve, I would expect mortgage delinquency statistics …… Read More