How to Analyze and Determine Fair Valuation for Large Financial Services Firms? An Expert Portfolio Manager Focuses on This Industry and Shares Insight

67 WALL STREET, New York - April 26, 2013 - The Wall Street Transcript has just published its Investing in Financial Services Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Investing in Financial Services - Interest Rates and Loan-Growth Strategies - Regulatory Outlook Gains Clarity - Long-Term Investing - Large Cap Investing - Longer-Term Investing

Companies include: American International Group, (AIG), The Blackstone Group (BX), Capital One Financial Corp. (COF) and many more.

In the following excerpt from the Investing in Financial Services Report, an expert portfolio manager discusses her investment philosophy and portfolio-construction strategy:

TWST: How are you exposed to the sector?

Ms. Firestone: We have a broad-based approach to the sector across the several holdings in our portfolios. Aureus only owns 35 to 40 names, so each stock represents valuable real estate, so to speak, in our accounts. If you look across our financial holdings, they range from one insurance company that's been restructuring, AIG (AIG); Blackstone (BX), which is a large and very successful private equity firm, as you know.

We own First Republic Bank (FRC), a distinctive boutique-style bank that sources from a very high-end clientele. And then, we bought a turnaround in the sector, Capital One (COF), because they've had some real difficulties and we thought the consumer finance company was very attractive at the current valuation at around 8 times earnings. So within our core equity portfolios, we have a combination of stocks in financial services that I would say don't fit the typical definition of the group.

Just to elaborate, First Republic was a purchase based on our belief almost 18 months as that the housing market was improving, when this was a contrarian idea. We actually first got to know the firm because one of our clients was switching banks and really liked FRC. We were intrigued and did considerable research, talking to local managers as well as meeting with the top executives. The company serves a very high-end clientele who feel underserved by the megabanks resulting from mergers over the past two decades.

The wealth management platform at First Republic includes over $32 billion in assets under management. They still have only about a 1% market share of high-net individuals in the New York area, compared to 13% in San Francisco, their home market, and there is growth potential in other promising markets as well. FRC has a strong balance sheet, very high credit quality and assets that are growing much faster than its competitors. At the current price of $37.5, the stock sells for about 12 times 2013 earnings.

Capital One Financial is a turnaround situation, selling at $56, with earnings for this year forecast at about $6.35, so it sells for under nine times earnings. The discount is probably justified by...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

  • Best Fidelity Funds for Your Retirement Savings

    Best Fidelity Funds for Your Retirement Savings

    Kiplinger Fidelity is home to some of the greatest stock fund managers of all time. At the top of the list is Peter Lynch, who during his tenure at Fidelity Magellan from 1977 to 1990 delivered a 29.1% annualized return. He beat out all other stock funds and bested Standard & Poor’s 500-stock index by an average of 13.5 percentage points per year. Since then, other stars have shone brightly, including Contrafund’s Will Danoff, Low-Priced Stock’s Joel Tillinghast and Growth Company fund’s Steve Wymer. The firm’s string of famous managers may explain why 22 of its funds land on a list of the 105 most popular mutual funds in employer-sponsored retirement savings plans. We set out to identify the

  • 8 Things You Should Never Keep in Your Wallet

    8 Things You Should Never Keep in Your Wallet

    That overstuffed wallet of yours can’t be comfortable to sit on. It’s probably even too clunky to lug around in a purse, too. And with every new bank slip that bulges from the seams, your personal information is getting less and less safe. With just your name and Social Security number, identity thieves can open new credit accounts and make costly purchases in your name. If they can get their hands on (and doctor) a government-issued photo ID of yours, they can do even more damage, such as opening new bank accounts. These days, con artists are even profiting from tax-return fraud and health-care fraud, all with stolen IDs. We talked with consumer-protection advocates to identify the eight things

  • UA
    Fox Business

    Under Armour Investors Punish CEO Kevin Plank

    Under Armour (NYSE:UA) CEO Kevin Plank is starting to sound like a broken record and investors are losing patience. The stock is seeing its biggest single-day loss in eight years, amid heavy volume, even as Plank downplayed concerns about the company’s declining growth rate on Tuesday. This doesn’t mean the demand for the Under Armour brand has disappeared, but it certainly hasn’t reappeared dollar-for-dollar in our distribution,” a seemingly-frustrated Plank said during post-earnings conference call.

  • Wells Fargo could see almost half its customers leave bank over scandal, management consulting firm cg42 says
    San Francisco Business Times

    Wells Fargo could see almost half its customers leave bank over scandal, management consulting firm cg42 says

    Steve Beck, founder and managing partner at cg42, told the San Francisco Business Times that the 14 percent of Wells Fargo customers planning to leave the bank would be far higher if not for the difficulty in moving to a new bank. No doubt Wells Fargo's rivals will be big winners if more customers exit Wells Fargo (NYSE: WFC). Credit unions, community banks and even Charles Schwab Bank (NYSE: SCHW) already appear to be benefitting from Wells Fargo's scandal. Cg42 says Bank of America (NYSE: BAC) and Chase Bank (NYSE: JPM) could also be big beneficiaries, given their national presence. On top of the 14 percent of existing customers that cg42 sees walking out the door at Wells Fargo, the consulting

  • Business

    10 Worst States for Taxes on Your Retirement Nest Egg

    iStockRetirees have special concerns when evaluating state tax policies. For instance, the mortgage might be paid off, but how bad are the property taxes--and how generous are the property-tax breaks

  • Nurse who survived Ebola settles with Texas hospital system
    Associated Press

    Nurse who survived Ebola settles with Texas hospital system

    A nurse who contracted Ebola two years ago while caring for the first person to be diagnosed in the U.S. with the deadly disease settled a lawsuit Monday against the parent company of the Dallas hospital where she worked. Attorneys for Nina Pham announced the settlement with Texas Health Resources. Pham contracted Ebola in the fall of 2014 while caring for Thomas Eric Duncan at Texas Health Presbyterian Hospital Dallas.

  • AAPL
    Money Talks News

    Apple Says 90 Percent of These Amazon Products Are Fakes

    A new lawsuit filed by Apple contends that 90 percent of iPhone devices and Apple accessories it recently purchased from Amazon were fakes. Apple says it purchased the products directly through Amazon, not a third party. Amazon is not named in the lawsuit, according to an Associated Press report.

  • Technology
    Yahoo Finance Video

    Inside Apple's first MacBook Pro and iMac redesign in years

    Investors and customers will be eyeing Apple's big unveiling of a new line of computers, which is expected to happen Thursday at its Cupertino headquarters. Major changes are expected, particularly for the iMac and the MacBook Pro, which hasn't had a major redesign in over 4 years.

  • Why Thousands of Combat Vets Have to Repay Their Enlistment Bonuses
    The Fiscal Times

    Why Thousands of Combat Vets Have to Repay Their Enlistment Bonuses

    The watchdog charged with monitoring how American money is spent in Afghanistan has in recent years identified projects in which hundreds of millions of taxpayer dollars have been wasted or gone missing: More than $100 million in over-budget expenditures to build the Afghan Ministry of Defense building and $150 million blown on luxury residences for members of the task force charged with rebuilding the Iraqi and Afghan economies, for example. The military has been trying to claw back excessive bonuses that the California National Guard paid to about 10,000 veterans – some of whom went on multiple combat tours – according to The Los Angeles Times. The Times says that with ongoing wars in Iraq and Afghanistan 10 years ago, the military was eager to boost re-enlistment and in many cases offered incentives of $15,000 or more that went beyond what was allowed.

  • For some low-income workers, retirement is only a dream
    Associated Press

    For some low-income workers, retirement is only a dream

    The photo and his story went viral and thousands of people donated more than $384,000 for his retirement. With no money saved for retirement, home care worker Gwen Strowbridge, 71, of Deerfield, Florida, plans to stay on the job until she can't physically work anymore. Studies have found that about one-third of low wage workers like Strawbridge say they'll never be able to afford retirement.

  • Wells Fargo fallout: Study says it's only going to get worse

    Wells Fargo fallout: Study says it's only going to get worse

    David Paul Morris | Bloomberg | Getty Images After weeks of ugly headlines, the worst of the fallout may just be starting for Wells Fargo, according to a new study on the bank's troubles. The scandal in which Wells Fargo admitted to signing up millions of customers for programs without their knowledge or consent initially cost it a $185 million fine. However, that could be only the beginning as the reputational damage intensifies. The bank stands to lose $99 billion in deposits, $4 billion in revenue and a customer base that could dwindle by up to 30 percent, a study released Monday by cg42 showed. Ultimately, about 14 percent of customers are actually projected to switch banks, an at-risk level

  • Ex-wife of former Subway pitchman Jared Fogle sues company
    Associated Press

    Ex-wife of former Subway pitchman Jared Fogle sues company

    The ex-wife of former Subway pitchman Jared Fogle is suing the restaurant chain for damages, saying the company received at least three reports indicating his sexual interest in children but failed to take proper action and continued promoting him as its spokesman. Katie McLaughlin said at a news conference Monday that she filed the lawsuit in Hamilton County Superior Court because she has questions about Subway's actions and inactions and wants to someday have answers for her two children, who are now 3 and 5 years old. Did they ever notify the authorities?" said McLaughlin, who said she was "shocked" to learn the accusations against her husband.

  • Ex-Intel (Nasdaq: INTC) workers are surveying laid-off employees
    Portland Business Journal

    Ex-Intel (Nasdaq: INTC) workers are surveying laid-off employees

    The ad hoc group formed by ex-Intel employees in the wake of the company’s massive global layoffs wants to know what thousands of their laid-off colleagues are up to. To do that, they have launched an online survey. It’s been six months since Intel said it would lay off 11 percent of its global workforce or 12,000 workers. of those cuts were in Washington County and thousands more were offered early retirement. A group called Intel Eliminati, created following a smaller layoff in 2015, took on a greater role connecting former co-workers with each other, and, hopefully new job opportunities. But, questions remain about how many of these former Intel folks have landed in new jobs. “We are going

  • Trump Surrogates Continue Their Apologist Tour to Election Day
    The Fiscal Times

    Trump Surrogates Continue Their Apologist Tour to Election Day

    It’s a thankless job being a Donald Trump surrogate these days. The job fell to campaign manager Kellyanne Conway and Republican National Committee Chairman Reince Priebus this weekend, and both twisted themselves in verbal knots casting the Trump campaign as something other than a foundering ship that’s headed to the bottom. After promising to deliver a “closing argument” in a speech on Saturday in Gettysburg, PA, Trump instead dedicated part of his remarks to promising to sue each of the dozen or so women who have accused him of sexual assault.

  • Business

    Bill Miller Buys Valeant, Sees It Doubling, Likes Financials

    Bill Miller, who is best known for beating the S&P 500 Index for 15 straight years, says he has been buying Valeant Pharmaceuticals International Inc. and financial stocks such as OneMain Holdings Inc.Miller said on CNBC that he purchased shares of Valeant

  • News

    2017 Consumer Reports New Car Reliability Results

    Find out what brands build the most reliable new cars, which ones are most likely to need repair, and what tends to go wrong.

  • Best Vanguard Funds for Your Retirement Savings

    Best Vanguard Funds for Your Retirement Savings

    Vanguard is the biggest fund company in the land, with more than $3 trillion in assets. So chances are high that many retirement savers have access to Vanguard funds in their 401(k) plans. But size is no guarantee of good results. Thirty-four Vanguard funds appear on a list of the 105 most popular mutual funds in employer-sponsored retirement savings plans. No other fund company comes close. Not surprisingly, of the 34 most popular Vanguard funds in retirement plans, 15 are index funds. And nine more are target-date portfolios—those set-it-and-forget-it funds that shift over time to more conservative allocations as the fund nears its target year. The remaining 10 are actively managed. We didn’t

  • Fannie Mae streamlines U.S. mortgage underwriting

    Fannie Mae streamlines U.S. mortgage underwriting

    Fannie Mae said on Monday it has launched a program to streamline its underwriting on mortgages for some borrowers that uses electronic data instead of physical proof of their income, assets and employment.

  • Under Armour May Be Wearing Out Its Welcome
    The Street

    Under Armour May Be Wearing Out Its Welcome

    In the last year, shares of Under Armour (UA)  are down 19% to around $38. Short-sellers crushed the stock after Sports Authority filed for bankruptcy. Under Armour reports third-quarter results on Tuesday. Can UA get investors get back in the game? Investors in Under Armour have had a difficult year, especially after that Sports Authority bankruptcy because the shorts thought UA's product sales would be hurt by the liquidation. In addition, in the second quarter management said it would take an impairment charge of approximately $23 million related to the liquidation. Of the estimated $163 million worth of sales Under Amour expected to come from Sport Authority, management said it would only

  • Teacher pensions under fire: 5 tips to prepare for retirement

    Teacher pensions under fire: 5 tips to prepare for retirement

    If you’re a teacher, the promise of a good retirement pension may have been a selling point when you took the job. But concerns over the funding of these pensions have some wondering whether their benefits will be there for them in full after their last day of work. Critics warn that pensions are at risk of severe underfunding in some states, and righting them hinges on tax increases so local governments can contribute their share. They say some pension funds won’t be able to generate the kinds of returns on investment that they’re banking on to keep them going. And as people live longer, they’re spending more years in retirement—collecting more pension dollars. Some have suggested teachers adopt

  • Oil dips on Buzzard restart, Iraq; U.S. crude tests below $50

    Oil dips on Buzzard restart, Iraq; U.S. crude tests below $50

    Oil prices dipped on Monday, with U.S. crude briefly falling below $50 per barrel, on news of the impending restart of Britain's Buzzard oilfield and Iraq's wish to be exempted from OPEC production cuts. Iraq's oil minister Jabar Ali al-Luaibi said the second-largest producer in the Organization of the Petroleum Exporting Countries (OPEC) wanted to be exempt from output curbs as it needed more money to fight Islamic State militants. OPEC hopes to remove about 700,000 bpd from an estimated global supply of 1.0-1.5 million bpd.

  • Blighted lives: The true cost of diabetes
    BBC News

    Blighted lives: The true cost of diabetes

    Steven Woodman walks like an old man. He needs a stick to maintain his balance as he hobbles forward. Steven is only in his late 50s, but the loss of three toes on one foot means he's unsteady on his feet. It is type 2 diabetes that has led Steven to where he is now. More accurately, it's ignoring the warnings and advice around diabetes that has left him facing a life of disability. He was diagnosed with type 2 diabetes, closely linked to lifestyle and weight gain, when he was still a young man. Steven, who lives in Shrewsbury, freely admits that, at the time, he ignored his GP's advice. "I was in denial. I never took it that seriously, so I carried on eating, going to the pub - doing things

  • Toyota again leads U.S. auto reliability survey, Buick surprises

    Toyota again leads U.S. auto reliability survey, Buick surprises

    Two Toyota Motor Corp brands again led the annual reliability survey from Consumer Reports magazine, and General Motors Co's Buick was the first American brand in at least 35 years to crack the top three, the consumer magazine said on Monday. It was the fourth straight year that Lexus and Toyota finished in the two top spots, and they have had an outstanding performance since Consumer Reports began tracking brand reliability in the early 1980s.

  • Business

    AT&T’s Big Dividend Is Getting Even Bigger

    You might have missed it amid the merger hullabaloo. But AT&T (T), already much-loved by yield-seeking investors, upped its dividend on Saturday, along with announcing its its plans to buy Time Warner (TWX). It wasn’t a very big increase as these things go. AT&T declared a quarterly dividend of 49 cents per share, or $1.96 annualized — a 2.1% increase from the current 48 cents a quarter payout. The dividend will be payable on February 1 next year to stockholders of record on January 10. The new dividend yield, assuming a steady stock price, is 5.3%, up from 5.2%. AT&T says the merger should improve its dividend coverage ratio. Wells Fargo analyst Jennifer Fritzsche implies that the merger could

  • Smartwatch sales tumble, dragged down by Apple

    Smartwatch sales tumble, dragged down by Apple

    Global smartwatch sales slid 51.6 percent in the third quarter, amid a steep decline for the Apple Watch ahead of its updated device, a market tracker said Monday. Apple, the largest smartwatch vendor, saw its sales down 71.6 percent. "The sharp decline in smartwatch shipment volumes reflects the way platforms and vendors are realigning," Llamas said.