BK - Bank of New York Mellon

[BRK7]

 

Most of its lines of businesses would be under pressure going forward. Assumptions are low interest rates, continuing pressure on fee reductions from its clients as they themselves need to cut costs, its asset management also faces fee pressure. Cannot take advantage of stock price as buybacks are stopped even though it has no need to do that.

 

Good news is that unlike other financials there is no tail risk to really worry about.

 

Even with all that it is likely to generate low double digit returns. Not too exciting at this time given what else is available.

 

Vinod

 

Thanks, yup, that make sense.  Low double digit returns with "low-ish" risk (relative to other banks) is an interesting combo to me.  But since you are not too excited about it, would you mind elaborating on your comment about "what else is available"?  Are you talking about other banks (e.g., WFC) or just equities generally?  Thanks!

[vinod1]

 

Most of its lines of businesses would be under pressure going forward. Assumptions are low interest rates, continuing pressure on fee reductions from its clients as they themselves need to cut costs, its asset management also faces fee pressure. Cannot take advantage of stock price as buybacks are stopped even though it has no need to do that.

 

Good news is that unlike other financials there is no tail risk to really worry about.

 

Even with all that it is likely to generate low double digit returns. Not too exciting at this time given what else is available.

 

Vinod

 

Thanks, yup, that make sense.  Low double digit returns with "low-ish" risk (relative to other banks) is an interesting combo to me.  But since you are not too excited about it, would you mind elaborating on your comment about "what else is available"?  Are you talking about other banks (e.g., WFC) or just equities generally?  Thanks!

 

This is a target rich environment. One of the 3-4 opportunities that we would probably get in a lifetime. In that sense, this looks meh.

 

Vinod

[Palantir]

 

This is a target rich environment. One of the 3-4 opportunities that we would probably get in a lifetime. In that sense, this looks meh.

 

Vinod

 

Could you please elaborate?

[vinod1]

 

This is a target rich environment. One of the 3-4 opportunities that we would probably get in a lifetime. In that sense, this looks meh.

 

Vinod

 

Could you please elaborate?

 

What I mean is that the current investment opportunity set is likely one of very attractive opportunities. Likely on par with what we had during 2008-9 period.

 

While looking at overall market it might seem like a small 15% correction, there are many that have taken quite a hit and my expectation is that there are likely lots of opportunities within them.

 

When there is real uncertainty, I think it gives us small investors some advantage and at least for me it has been a very fertile environment for investments. Right now, no one knows how severe the downturn would be, how long it would be and what the recovery looks like. So there is a lot of uncertainty and for whatever reason, many businesses would not be priced as efficiently as during more normal times. I saw this in 2008-9 period with a range of businesses, 2012-14 with financials, 2016 again with banks.

 

So I do not want to settle for good returns in this environment. Spending more time to look for opportunities might be more fertile.

 

Still going through them and for many I had to rebuild my estimates from the ground up as Covid had a major impact.

 

Vinod

[BRK7]

 

While looking at overall market it might seem like a small 15% correction, there are many that have taken quite a hit and my expectation is that there are likely lots of opportunities within them.

 

 

Good point -- the S&P 500 is market-cap weighed and skewed by the likes of Amazon, with its $1.2T market cap and 30% YTD gain.  Meanwhile, the Russell 2000 (while also market cap weighted, it's a better proxy for small cap performance) is down approx 26%. And then there are lots of companies in hospitality/travel/leisure/consumer discretionary that have been absolutely clobbered.