What Makes Western Alliance Bancorporation (WAL) Stock an Investment Opportunity?
Miller Value Partners, an investment management company, released its “Deep Value Strategy” second-quarter 2023 investor letter. A copy of the same can be downloaded here. In the second quarter, the Deep Value Strategy was down 2% net-of-fees lagging behind the overall market and the S&P 1500 Value Index. Lower valuation and smaller cap stocks trailed the overall equity market from March to May. The firm also witnessed significant valuation compression in its holdings. In addition, please check the fund’s top five holdings to know its best picks in 2023.
Miller Value Deep Value Strategy highlighted stocks like Western Alliance Bancorporation (NYSE:WAL) in the second quarter 2023 investor letter. Headquartered in Phoenix, Arizona, Western Alliance Bancorporation (NYSE:WAL) is a bank holding company. On July 19, 2023, Western Alliance Bancorporation (NYSE:WAL) stock closed at $46.42 per share. One-month return of Western Alliance Bancorporation (NYSE:WAL) was 26.83%, and its shares lost 41.05% of their value over the last 52 weeks. Western Alliance Bancorporation (NYSE:WAL) has a market capitalization of $5.083 billion.
Miller Value Deep Value Strategy made the following comment about Western Alliance Bancorporation (NYSE:WAL) in its second quarter 2023 investor letter:
"During the quarter, we initiated positions in Western Alliance Bancorporation (NYSE:WAL) and Gray Television (GTN). Western Alliance is a leading national commercial bank with strong regional markets. The company has a capital-light business model (less branch focus). Following the Silicon Valley Bank collapse, Western Alliance saw significant share price weakness as the marketplace tried to draw similarities between the two companies. While initially experiencing deposit weakness, that has subsided and returned to growth as Western has a significantly more diversified business model with long-term customers having multiple products and services. The company’s underwriting capabilities and operations are best-in-class in our opinion. Management also appears fully aligned with shareholders and focused on shifting underwriting to a lower risk portfolio of loans. The company has taken incremental actions that should have accretive benefits to enhance capital ratios starting this quarter and further improving into 2024. Western’s share price is down 60%+ from its 52-week high, a deep discount to book value and 30%+ normalized earnings yield. We anticipate Western’s earnings troughing in the near term and improving over the next 6 to 12 months.
Long-term growth should remain above the peer group, ROAs at the high end of the industry, supporting Return on Tangible Common Equity (ROTCE) of 18-20%, with possible upside to 20-22% as the mortgage market improves over time. Both estimates are nicely above consensus long-term expectations. Over the next 3-5 years, returning to normalized EPS and valuation expanding back towards its historical average would support upside potential near three times current price levels."
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Western Alliance Bancorporation (NYSE:WAL) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 31 hedge fund portfolios held Western Alliance Bancorporation (NYSE:WAL) at the end of first quarter which was 26 in the previous quarter.
We discussed Western Alliance Bancorporation (NYSE:WAL) in another article and shared Madison Small Cap Fund's views on the company. In addition, please check out our hedge fund investor letters Q2 2023 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
