Today I want to continue introducing you to some of the greatest investors around today and show you what stocks they expect to provide outsized returns in 2023 and beyond.
This same idea has been written about in all sorts of financial media publications and discussed to death on cable TV financial programs.
It happens every January.
But the problem is that these outlets are going for clicks, eyeballs, and viewership numbers. That means they talk about what famous investors are buying for 2023.
While that may be interesting, fame is rarely the same as profitability.
So, let’s take a look at what the investors that will actually make money this year are doing…
The truth is that most famous investors are already ridiculously rich, and their investment selections are as much about preserving wealth as they are about growing wealth.
The best-known investors in the world have portfolios worth hundreds of millions, and even billions, of dollars. They cannot benefit from the opportunities that exist in investing in smaller companies. But you and I can, and so can the very best investors of today.
I’m not talking about people who are famous right now. In fact, some of them will never be famous, because they invest in dark corners of the market that most people do not even consider.
But that doesn’t mean they aren’t successful.
The firm I will tell you about today invests in one of my favorite dark corners of the market. I have been investing in community bank stocks for decades with outstanding results. Two of my current services here at Investors Alley, The 20% Letter and The Bank Takeover Letter, go into this in a lot more detail.
Over the past three decades, I have found that a small handful of firms also invest in community bank stocks. These investors realize they will never be amongst the biggest or best-known. The size of the opportunity set means that the amount of money that can be deployed is limited at any given moment.
The team at Patriot Financial Partner GP gets this. The firm has been around since 2007 and has raised four separate private equity funds specializing in community bank opportunities.
Over the years, I have owned shares in banks at which Patriot Financial was not only a significant shareholder but also campaigned successfully for the sale of the bank we both owned. I have also owned banks that Patriot Financial eventually bought, for significant gains.
I use very different rules for buying banks than Patriot does. As a private equity fund, Patriot Financial often takes large positions and pushes for—and even arranges—the sales of one of its portfolio banks.
We cannot do that.
I like our approach better than theirs, and think the strategies used in The 20% Letter and The Bank Takeover Letter are better for individual investors, but I don’t think you will be mad a few years from now if you buy into Patriot’s top holdings.
You will undoubtedly be better off than an index investor and the hope-and-dreamers buying into overvalued tech stocks with no profits and poor fundamentals.
Here, then, are Patriot Financial’s top three holdings as of the end of the third quarter of 2022:
USCB Financial Holdings Inc. (USCB) operates as the bank holding company for U.S. Century Bank based out of Miami, Florida. The bank has branches in the Miami area with about $2 billion in deposits. Nearly three-quarters of its loan portfolio is in single-family, commercial, and multifamily real estate loans. And USCB’s asset quality is perfect: there are no past-due loans and no non-performing assets.
In addition to traditional banking services, U.S. Century has a thriving homeowners association banking business and a global banking business that provides correspondent banking services for banks headquartered in certain Latin American and Caribbean countries.
Patriot Financial and Priam Capital each own 22% of the bank. The USCB IPO was done in 2021, and I suspect it is only a matter of time before Priam and Patriot begin looking for a buyer.
At 1.31 times book value with no dividend, USCB does not fit into our portfolios, but it is an interesting special situation bank.
Banc of California Inc. (BANC) operates as the bank holding company for Banc of California in Santa Ana, California. The bank has 33 branches and a little over $9 billion in total assets. Three-quarters of the loan portfolio is backed by either residential or commercial real estate. Non-performing assets are just 0.39%, so the loan portfolio is solid.
Patriot Financial currently owns 5.51% of this bank. The price-to-tangible book value ratio is too high, and the yield is too low to be in our portfolios, but you will still probably do better with this bank than an index fund for the next several years.
Amerant Bancorp Inc. (AMTB) operates as the bank holding company for Amerant Bank in Coral Gables, Florida. Amerant has 25 branches and about $8.7 billion in assets. 80% of the loan portfolio is in loans backed by residential or commercial real estate. Non-performing assets are just 0.27% of total assets.
Patriot Financial currently owns 5.53% of Banc of California. While the bank does not fit my criteria for the Bank Takeover Letter or The 20% Letter, Patriot believes the stock has upside potential.
Note that we have said nothing about electric vehicles, artificial intelligence, or any other breakthrough technologies. Just plain old uncomplicated banking.
Before you dismiss good old-fashioned banks, Patriot has outperformed the indexes by a wide margin since the firm opened its doors in 2007.Historically, the banking strategies I use in Bank Takeover Letter and The 20% Letter have also offered market-beating returns for patient-yet-aggressive investors. Click below to see how to join me today.
$25k into $4.1 million from this??
Check out the picture on the next page. It’s a beat up building that would’ve turned $25k into $4.1 million. It’s not a real estate play. Actually, with the Fed raising rates, it’s the best asset to buy right now. View this beat up, millionaire-making asset.