Bonhoeffer Capital Management, an asset management company, released its third-quarter 2024 investor letter. A copy of the letter can be downloaded here. In the third quarter of 2024, the fund returned a gain of 11.3% net of fees compared to 7.7% returns for MSCI World ex-US, a broad-based index, and 8.5% return for the DFA International Small Cap Value Fund. The fund’s stocks have an average EV/EBITDA of 4.6 and a weighted average earnings/free cash flow yield of 12.5% as of September 30, 2024. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2024.
Bonhoeffer Capital Management highlighted stocks like Northeast Bank (NASDAQ:NBN), in the third quarter 2024 investor letter. Northeast Bank (NASDAQ:NBN) offers banking services to individual and corporate customers. The one-month return of Northeast Bank (NASDAQ:NBN) was -8.14%, and its shares gained 65.01% of their value over the last 52 weeks. On December 30, 2024, Northeast Bank (NASDAQ:NBN) stock closed at $91.07 per share with a market capitalization of $747.347 million.
Bonhoeffer Capital Management stated the following regarding Northeast Bank (NASDAQ:NBN) in its Q3 2024 investor letter:
“Northeast Bank (NASDAQ:NBN is a community bank located in Maine that provides banking service to small and mid-sized businesses (“SMEs”) in Maine, SBA loans nationwide and purchases and services orphan loans. Orphan loans are loans which are sold by either the FTC, as a result of forced sales associated with mergers, or the FDIC, as a result of forced sales from insolvency. NBN operates out of its headquarters in Portland, Maine, an office in Lewiston, Maine, an office in Boston, Massachusetts and seven branch locations across Maine. NBN’s strategy includes purchasing orphan loans as well as originating specialty loans such as PPP loans during COVID or SBA loans currently. NBN also has specialized loan purchase group, National Lending Group (NLG) that purchases and services orphan loans. The orphan loans team has over 30 years of experience in originating and servicing FTC and FDIC sold loans. Much of the NLG’s current management team worked for Capital Crossing Bank that was founded by NBN’s CEO and President Richard Wayne in the late 1980s to purchase orphan loans. Capital Crossing was sold to Lehman Brothers in 2007. As a public company, Capital Crossing generated over 20% annualized returns from the IPO to sale. After the financial crisis, Richard Wayne was able to reassemble the Capital Crossing team as NBN, after he gained control of the company in 2010. Other banks that have grown via buying orphan loans include Beal Bank and First Citizens whose current or peak size is multiples of NBN’s current size illustrating decent growth potential for NBN.
NBN has grown EPS by almost 40% per year over the past five and ten years. This growth is driven by opportunistically buying orphan loans and originating PPP loans during COVID and SBA loans currently. NBN’s lending franchise and loan purchase generates an average loan yield of 8.9% and has organically grown loans by 26% per year over the past five years. The incremental loan yield is estimated by management to be 8.8%. The strong loan growth is comprised of criticized plus watch list loans of 1.4%, non-performing loans (“NPAs”) of 0.9% and a loan loss reserve to NPAs of 118%. NBN finances its loans through CDs and generates a high cost of funds of 4.0%. The resulting net interest margin (NIM) is 4.9% and is sustainable as funding costs will decline with declining loan yields. NBN’s largest shareholder is its management, which holds 15% of its common stock…” (Click here to read the full text)
A customer using the bank’s mobile banking service, enabling them to access their money from anywhere.
Northeast Bank (NASDAQ:NBN) is not on our list of 31 Most Popular Stocks Among Hedge Funds. As per our database, 10 hedge fund portfolios held Northeast Bank (NASDAQ:NBN) at the end of the third quarter which was 10 in the previous quarter. While we acknowledge the potential of Northeast Bank (NASDAQ:NBN) 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.
In another article, we discussed Northeast Bank (NASDAQ:NBN) and shared Bonhoeffer Capital Management’s views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q3 2024 page for more investor letters from hedge funds and other leading investors.
READ NEXT: Michael Burry Is Selling These Stocks and A New Dawn Is Coming to US Stocks.
Disclosure: None. This article is originally published at Insider Monkey.