Why This Deep Value Investor Doesn't Care About Apple, Google
Tim Melvin is a Marketfy Maven and deep value investor. He recently joined Benzinga’s #PreMarket Prep to explain why he prefers focusing on community banks and long-term, boring plays rather than the day-to-day excitement of high-growth stocks like Apple Inc. (NASDAQ: AAPL) or Google Inc (NASDAQ: GOOG).
To start, Melvin said they make an enormous amount of money. A few weeks ago, Sterne Agee released a report tracking small banks and what happens to them when an activist gets involved.
"There's a bunch of activist firms around that specialize in small, community banks," he explained. "They're not Carl Icahn. They’re not Bill Ackman. They're not on TV with 250-page powerpoint slides telling you why you should buy or sell a particular stock, but they're pretty effective."
The report looked at the average return from the NASDAQ bank indexes over the past decade, which Melvin said was around 17 percent. But the stocks with an activist presence had average returns of 49 percent from the day the activist took a position.
"I mean, it's a huge outperformance," he said.
The ten tiny banks portfolio has more than doubled markets rate of return. Find more cheap and safe banks here http://t.co/OIMcSM7UzC
— Tim Melvin (@timmelvin) October 17, 2014
In addition, once an activist filed, one-third of all those banks were taken over at a "clearly sizeable" premium to the investment price.
"I listen to everybody saying, ‘What’s Apple going to do? What’s Google going to do?’ I don’t care what Apple and Google are going to do, unless by some reasons they should drop below book value because I’m down here not having all the fun in and out every day that you guys have," Melvin said. "But we’re making a lof money in these little banks."
Melvin also talked about oil and the Banc of California Inc (NYSE: BANC).
Check out his full interview here:
Don’t forget to tune in to Benzinga’s #PreMarket Prep Monday-Friday 8-9:45 a.m. ET all of the premarket info, news and data needed to start the trading day.
© 2016 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.