During the period of 1980, at the end of President Carter's administration, the Federal Reserve slammed on the brakes to curb economic overheating and raised interest rates to the highest level in history. In this case, although the growth prospects of the banking industry are very good, the banking stocks are actually being sold at a market price lower than the book value. I'm not sitting in my office, patting my head and thinking about what would happen to bank stocks if interest rates were raised, so I found that bank stocks were seriously undervalued; This was discovered at a regional investment conference hosted by Robinson-Humphrey Investment Company in Atlanta.

In fact, at that time, I began to think about banking stocks, not at this meeting, but outside this meeting. When I attended this investment conference, I was fed up with being introduced by one listed company after another with no operating history and no profit, so when I had a rest in the middle of the conference, I slipped out and visited the nearby First Atlanta Bank. This bank has achieved a high rate of return for 12 years in a row, and its profitability is much higher than that of many listed companies that boasted at the meeting. Obviously, investors ignored this excellent bank. Five years later, when it merged with Wachovia Bank in North Carolina, its share price rose 30 times.

Wall Street is always very concerned about the stocks of listed companies that are on the verge of life and death, but it is often not interested in the banking stocks with strong strength and stable performance. For example, First Atlanta Bank's share price-earnings ratio is only half of the average market price-earnings ratio.

From the first day I heard about First Atlanta Bank, I was very interested in these regional banks with good performance, but at the same time I was very confused. Why is the market not interested in such a good bank stock at all? Ask any fund manager, Figure 4-2, Figure 4-3, Figure 4-4, which company's stock is rising like a rainbow, and he will probably say Wal-Mart, Philip Morris, or Merck. These stock charts all look like the upward trend of fast-growing companies. Who would have thought it would be a traditional banking stock? In Figure 4-2, the stock price rose by 65,438+00 times in 65,438+00 years, which is the stock trend of Wachovia Bank, Figure 4-3 is the stock trend of Northwest Bank of Minneapolis, and Figure 4-4 is the stock trend of NBD Bank Company in Detroit.

I am still surprised that banks like NBD have maintained a profit growth rate of 15% for many years, which is as high as the performance growth rate of high-speed growth companies like Pep Boys or Dunkin on onuts, but the price-earnings ratio given by the market to these banks with the same high-speed growth performance is very low. Perhaps the market generally believes that banks are mature public utilities, and it is taken for granted that banks will only have a low growth rate like an old cow pulling a broken car, and it is impossible to have a high growth rate. This is really wrong.

The mispricing of these local banking stocks in the market has created many excellent opportunities for Magellan Fund to buy at low prices, which is why Magellan Fund's position in the banking industry is 4-5 times higher than that of other investors. My favorite bank stock rose from $2 to $80. Do you want to know which bank it is? How annoying it is to listen to the name of 53 banking company, but I can't help but want to buy it at first sight, because I find that the more annoying the name, the more likely the stock is undervalued. Another bank stock I like is Meridian Bank, which has not been visited by investors for many years.

Another bank stock is Key Corp This bank has a set of "frost zone" business theory, that is, by acquiring small banks, it focuses on doing business in cold areas. Because people in these areas are generally frugal and conservative, they rarely default on loans, so the business of banks is quite prosperous.

However, it is the regional banks that make the most money from banking stocks, as shown in Figure 4-2, Figure 4-3 and Figure 4-4. I always look for commercial banks with a solid customer base, high loan efficiency and prudence. In the following chapter 6, Table 6-2 lists the 50 most important banking stocks of Magellan Fund.

Buying shares in one bank will let me know about another bank, so I bought bank shares one after another. By the end of 1980, I had invested 9% of my fund in different bank stocks of 12.

Not surprisingly, the stock market crash gave Magellan Fund a good start. At 1979, the P/E ratio of my former 10 stock is between 4 and 6 times, while at 1978, the P/E ratio of my former 10 stock is only 3 to 5 times. When the price-earnings ratio of a good company's stock is only 3~6 times, it is almost impossible for investors to lose money.

In the annual report released in March, 198 1, I am pleased to point out that Magellan Fund rose by nearly 100%, while the S&P 500 index only rose by 33.2% in the same period. Among them, banking stocks contributed a lot.