Banking Pool

“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.” – Henry Ford.

The third pool of similar investments used with the Investment Fund is banking. Banking is a highly regulated industry, governed by the Federal Reserve, and thinly capitalized in comparison to other industries. The balance sheet is strongly weighted with current assets and liabilities. It is rare for the stock to trade at more than 1.5 times traditional book value. The top three key performance indicators are 1) the spread between interest earned and interest paid; 2) revenue from non-interest sources; and 3) the quality of the loans issued.

There are different tactics taken when reading and interpreting a bank’s set of financial statements. The articles that follow in this area explain the respective interpretations of financial reports, how to key in on important bits of information, and how to properly set the buy and sell points for the respective member stocks.

The key advantage of bank stocks is the increased volatility of the stock’s price. In general, the stock’s price for banks vacillates at a higher frequency than the other two pools of the Club’s Investment Fund. This allows for short-term opportunities to fill the voids when holding cash. A perfect example was the intraday price change for Comerica Bank on March 13, 2023. Knowing this industry’s standards allowed this site’s Value Investment Fund to earn $20,400 on a $38,400 investment within 3 hours.

There is an in-depth explanation of why knowing an industry’s business principles is essential to success in the articles below.

Over the last six years, this pool of investments generated $42,209 in realized gains across eight buy/sell transactions. The following is the summary of value from this banking pool from the last six years:

• Realized Gains                                                    $42,208.87
• Average Investment Basis                                   $15,177.11
• Annualized Return                                                   46%
• Dividends Earned                                                  $2,627.83
• PUT Options’ Earnings                                             $434.71
• Total Earnings Banking Pool                               $45,271.41

The following downloadable pdf provides the details of all activity during the last six years:

Banking Pool - Six Years of Results Through 09-30-25 Value Investment Fund

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To access the articles, models, spreadsheets, and tutorials related to the banking pool, you must be a member of the Value Investment Club. To join, go to the Membership page on this site (located in the value investing tab in the main menu above).

Below are articles related to the banking pool. Only the excerpts are available to non-members. Full access to the respective article requires a membership status.

• Sold Wells Fargo – 34.59% Annualized Return

  
  Sold Wells Fargo – 34.59% Annualized Return Wells Fargo crossed the $57 per share threshold this afternoon just after 2 PM ET. The last time Wells Fargo hit $57 per share was back in February 2022. The only issue holding Wells Fargo back from achieving more than $65 per share is the restriction imposed by the ...

• Bought 400 Shares – Wells Fargo

  The Value Investment Fund paid $39.51 per share including transaction fees of $1 per share for Wells Fargo. Total investment was $15,804. The Fund now holds 500 shares of Wells Fargo. 

• Sold Comerica Bank Two Hours Later

  
  One of the advantages of value investing utilizing pools of similar stocks from a single industry is that every now and then, like once a decade, a unique opportunity will present itself to take advantage of the knowledge and hard financial analysis work one does. In this case, it happened today. Comerica Bank experienced a ...

• Bought Comerica Bank

  Today, the Value Investment Fund took advantage of the chaos in the banking industry and purchased 1,200 shares of Comerica Bank after the the share price dropped below $30 per share.

• Sold Wells Fargo Position

  The Value Investment Fund sold its position in Wells Fargo in preparation for two sets of PUTs that the Fund will have to comply with the terms of the PUT contracts.

• Sold PUTs on JPMorgan Chase & Co.

  Yesterday, May 3rd, 2022, the Value Investment Fund sold 246.9135 PUTs on JPMorgan Chase & Co. with a strike price of $80 per share. These PUTs expire on June 16, 2023 (13 months).

• Bank of New York Mellon – Monitor Closely

  
  Overall, Bank of New York Mellon is in good financial condition and even with the adjustment for a reduction in revenue tied to Russian transactions, the bank will regain market value once the entire market shifts towards a positive position in comparison to the various index values on 12/31/21.

• Wells Fargo Bank – One Year Report

  One year ago on January 12, 2021, the Value Investment Fund purchased its first tranche of Wells Fargo Bank. At that time, shares were purchased for $33.24.

• Calculating Intrinsic Value for Bank Stocks

  Financial institutions, including banks, are highly regulated, extremely leveraged, and susceptible to interest rate fluctuations. Due to this unique exposure, calculating intrinsic value for bank stocks requires modification of the most popular valuation models.

• Purchased Bank of New York Mellon Corporation

  
  The banking pool of the Value Investment Fund purchased 232.9373 shares of Bank of New York Mellon Corporation trading at $41.93 at close of business on Friday January 22, 2021.

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