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FPA Changes Tune on Banks

After years of avoiding large financials and banks, FPA manager Steven Romick recently changed his tune. Romick noted in a July letter to shareholders that his FPA Crescent (FPACX) fund established a small position in three large banks. Based strictly on fundamental, bottom-up analysis, Romick found the valuations of these banks too compelling to pass up. Still, macroeconomic and regulatory concerns limited FPA Crescent's position to just 1.3% in the three banks.


However, at today's prices, Romick finally sees value in large, domestic banks. He estimates that Crescent's basket of financials trades at 85% of tangible book value and roughly 7 times normalized earnings. From a strictly bottom-up perspective, these stocks deserve a much heavier weighting in the portfolio, Romick said.


  • edited August 2011
    He patiently waited until he believed valuations were reasonable and started a position that didn't involve massive risk to the fund. I didn't think the financials were a value for the last couple of years and still think they aren't (and beyond that, even if things stabilize I think there are better places to be than banks) but can respect the reasonable, fairly conservative and patient way that Romick approached this investment.

    Kotok Adding to Bank Holdings for First Time Since 2007
    6 hours ago - Bloomberg

    Aug. 25 (Bloomberg) -- David Kotok, chairman and chief investment officer of Cumberland Advisors, talks about his investment strategy for financial shares. Kotok also discusses Warren Buffett's $5 billion investment in Bank of America Corp. and the outlook for Apple Inc. shares.

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