OFG - OFG Bancorp

[Guest MarkS]

I know that several of you guys/gals have looked at OFG. For those unfamiliar with the name it is a Puerto Rican bank. As of yesterday, the stock traded at about $5 and had a market cap of about 223 million. At one point the bank's exposure to Puerto Rican debt/loans exceeded their equity.  Management has been aggressively reducing their exposure.  According to their last report, they have reduced this exposure to about 433 million.  The bank has a tangible book value per share of $14.53 and tangible equity of  about 897 million. Even if the bank wrote  off all of their exposure to Puerto Rican government debt, the bank would still trade at about 50% of equity.  I don't have a position in this stock. But I am sorely tempted to take a flyer. I would appreciate any imput that you can provide.

Thanks

Mark

[bskptkl]

Looks to me like the "too hard" pile...

[Guest MarkS]

Thanks bskptkl,

Sometimes I need to be  reminded that a too hard basket exists. I can buy BAC at a huge discount to TBV. I don't need this kind of risk.

Thanks

Mark

[bskptkl]

Saw this Munger quote from recent Daily Journal meeting - thought it was wise:

 

No one should buy a bank without a feeling for how shrewd management is. It is easy to delude yourself into thinking things, as it is very easy to hide the real numbers. Don’t invest in banks without real knowledge.

[Spekulatius]

Thanks bskptkl,

Sometimes I need to be  reminded that a too hard basket exists. I can buy BAC at a huge discount to TBV. I don't need this kind of risk.

Thanks

Mark

 

My opinion exactly. BAC is a fairly straightforward value proposition, while OFG is hard. We know that there should be haircuts to OFG tangible book value, but we don't know how significant they should be.  I think BAC does not need haircuts to their tangible book and they are building tangible book relatively quickly through earnings and tax deferrals.

 

There is no reason to make investing more difficult than it needs to be.

[Guest MarkS]

Amen!

[oddballstocks]

Thanks bskptkl,

Sometimes I need to be  reminded that a too hard basket exists. I can buy BAC at a huge discount to TBV. I don't need this kind of risk.

Thanks

Mark

 

My opinion exactly. BAC is a fairly straightforward value proposition, while OFG is hard. We know that there should be haircuts to OFG tangible book value, but we don't know how significant they should be.  I think BAC does not need haircuts to their tangible book and they are building tangible book relatively quickly through earnings and tax deferrals.

 

There is no reason to make investing more difficult than it needs to be.

 

I would disagree that BAC is easier than OFG, but then again that's what makes a market!

[Guest MarkS]

Oddball,

Are you saying that because most of the big money center banks have opaque balance sheets? Or are you saying something specific about OFG?  I would love your opinion. I noticed in other posts that you've looked at OFG previously.

Thanks

Mark

[bbarberayr]

I believe that Puerto Rico stocks are good for a reasonable sized position in a portfolio.  Odds are, this whole thing get resolved and most businesses are fine.  It's kind of a "buy when blood is in the streets" situation right now.

 

I've invested in Assured Guarantee (AGO) which has been punished for its Puerto Rico exposure, but should end up fine if you read their web site.

 

I've also got a small position in payment company EVTC as they have a pseduo-monopoly on payment in Puerto Rico and other Caribbean islands and this continues to grow.

 

Personally, I would stay away from OFG, but I would consider buying into BPOP, which is also very cheap and bigger, safer bank.

 

I'd also suggest taking a look at the articles on the BTIG website as they have done a lot of work on companies in Puerto Rico.

[Guest MarkS]

Thanks bbarberayr,

I own shares of  AGO as well. I'll check out BPOP, EVTC and the BTIG Web site.

Mark

[Guest neiljgsingh]

If you're interested in PR banks specifically, Howard Marks of Oaktree has held a pretty large position in FBP for some time.

[Guest MarkS]

Thanks  neiljgsingh,

I'll check out FBR.

Mark

[bbarberayr]

The other Puerto Rico stock you can buy is GTS - they run the Medicare in Puerto Rico.  Been watching it for a while too, but haven't bought.  It got quite cheap a couple years ago when the government put the Island  contract out for bids.

 

There's a Puerto Rico Stock Index which summarizes this, but no ETF.  An ETF would probably be a good way to go if someone developed one:

 

http://www.bgfpr.com/investors_resources/puerto-rico-stock-index.html