Black Bear Value Partners, an investment management firm, published its first-quarter 2025 investor letter. A copy of the letter can be downloaded here. Black Bear Value Fund returned +0.8% in March and -1.3% YTD and the S&P 500 returned -5.7% in March and -4.3% YTD. HFRI Value Index returned -2.0% in March and -0.5% YTD. In addition, please check the fund’s top five holdings to know its best picks in 2025.
In its first quarter 2025 investor letter, Black Bear Value Fund emphasized stocks such as Flagstar Financial, Inc. (NYSE:FLG). Flagstar Financial, Inc. (NYSE:FLG) is a bank holding company that provides banking products and services. The one-month return of Flagstar Financial, Inc. (NYSE:FLG) was -10.81%, and its shares gained 17.12% of their value over the last 52 weeks. On April 8, 2025, Flagstar Financial, Inc. (NYSE:FLG) stock closed at $10.40 per share with a market capitalization of $4.31 billion.
Black Bear Value Fund stated the following regarding Flagstar Financial, Inc. (NYSE:FLG) in its Q1 2025 investor letter:
“Flagstar Financial, Inc. (NYSE:FLG) is the former New York Community Bank (a mashup of Flagstar Bank, New York Community Bank and assets from Signature Bank). Like our SHORT investments in Silicon Valley Bank and First Republic, FLG had a hole in their balance sheet (from soured multifamily and office real estate vs. long duration securities). That is where the similarities end.
FLG raised over $1BB in additional capital, led by former Treasury Secretary Steven Mnuchin. They revamped the management team and brought in a superstar CEO in Joseph Otting who successfully turned around OneWest Bank post GFC (formerly known as IndyMac Bank). In 12 months, the management team has accomplished more than most teams can do in 2+ years. They have reviewed nearly all the loans on the books, sold off non-core assets raising additional capital and are focused on delivering a narrowly-focused, well-capitalized boring regional bank. In this case boring is good. Importantly, they have taken a conservative view of their loan book and a large credit reserve. This contrasts with several bank/private credit lenders we are short who have taken minimal reserves. Mr. Otting and his team are my kind of managers – they are plain spoken, hardworking and plan for the worst while hoping for the best.
At quarter-end the bank was trading at ~67% of a conservatively marked balance sheet. This is in contrast with similar banks (who are NOT conservatively marked) trading at 140-160% of their tangible book value. FLG should complete working thru the bulk of their issues by the end of 2025 and approach “normal” during 2026. Given the conservative nature of the management team, I wouldn’t be surprised if it happened sooner. At these prices the downside seems minimal and could see this business up 50-150% over the next 1-3 years as it is more appropriately valued.”
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Flagstar Financial, Inc. (NYSE:FLG) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 35 hedge fund portfolios held Flagstar Financial, Inc. (NYSE:FLG) at the end of the fourth quarter compared to 25 in the third quarter. While we acknowledge the potential of Flagstar Financial, Inc. (NYSE:FLG) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
We covered Flagstar Financial, Inc. (NYSE:FLG) in another article, where we shared the list of best performing bank stocks so far in 2025. In the previous quarter, Black Bear Value Partners increased its stake in Flagstar Financial, Inc. (NYSE:FLG). In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.