Moon Capital Management, an investment management company, released its second-quarter 2023 investor letter. A copy of the same can be downloaded here. The stock prices moved extraordinarily during the first half and the S&P 500 increased approximately 16% during the period. The fund increased approximately 11% in the first half of 2023 lagging behind the S&P500’s 15.9% return. In addition, you can check the top 5 holdings of the fund to know its best picks in 2023.
Moon Capital Management highlighted stocks like First Horizon Corporation (NYSE:FHN) in the second quarter 2023 investor letter. Headquartered in Memphis, Tennessee, First Horizon Corporation (NYSE:FHN) is the bank holding company for First Horizon Bank. On July 21, 2023, First Horizon Corporation (NYSE:FHN) stock closed at $12.63 per share. One-month return of First Horizon Corporation (NYSE:FHN) was 13.17%, and its shares lost 42.98% of their value over the last 52 weeks. First Horizon Corporation (NYSE:FHN) has a market capitalization of $7.06 billion.
Moon Capital Management made the following comment about First Horizon Corporation (NYSE:FHN) in its second quarter 2023 investor letter:
A purchase: First Horizon Corporation (NYSE:FHN)
Last quarter we discussed several banks that fell victim to the Federal Reserve’s rapid raising of interest rates. With three banks having been recently put into receivership and many others struggling due to misplaced interest rate bets, it is easy to see why many observers are bearish on the entire banking industry. From its high this February, the S&P Regional Banking ETF (KRE) was off 43% at its low in May, its largest drop since the 50% selloff during the 2007-09 Great Financial Crisis.What has been largely absent from the discussion of company-specific banking woes and larger systemic risks such as deposit runs has been the mention of industry profitability as a whole. Given the overall negative news about U.S. banks, few would guess that bank profits reached an all-time high of $80 billion in the first quarter of this year. Adjusting for one-time gains related to the acquisition of banks in receivership, earnings are up 15% year-over-year. This earnings strength stems from the very factor that has left some banks on life support: the surge in interest rates. While this rise spells catastrophe for banks that loaded their portfolios with long-duration, fixed-rate investments, it benefits banks that were properly positioned, as it allows them to earn higher interest income. As banking analyst Steve Eisman aptly summed up the current situation “We are not having a banking crisis. We are having a crisis of certain banks.”
Historically, most bank failures were caused by credit losses, an issue that was largely absent in the three high-profile bank failures earlier this year. While there are looming concerns about weakness in the commercial office market (an area in which many regional banks are generally overexposed – more on that below), non-performing loans have yet to jump materially, and banks are better capitalized and hold more liquidity than in times preceding prior crises. Commercial real estate defaults are likely to increase in the coming years, but most banks are well-provisioned for potential increases. Despite the economy having yet to experience any meaningful credit cycle stress, shares of regional banks have largely collapsed, creating a situation that offers some unique opportunities.
We took advantage of the indiscriminate selloff in regional bank stocks and purchased shares in First Horizon Corporation (FHN) following the termination of its merger agreement with Toronto Dominion Bank (TD). By our judgment, First Horizon fits squarely in the group of banks set to perform well in the current rate environment – those with robust deposit bases that operate in pro-growth markets and carry significant variable rate loans. We view First Horizon as even further discounted than its cheap peer group, solely due to the uncertainty surrounding the unsuccessful TD merger; we expect that this discount will be resolved over time…” (Click here to read the full text)
First Horizon Corporation (NYSE:FHN) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 60 hedge fund portfolios held First Horizon Corporation (NYSE:FHN) at the end of first quarter which was 49 in the previous quarter.
We discussed First Horizon Corporation (NYSE:FHN) in another article and shared the list of stocks receiving upgrades from analysts. In addition, please check out our hedge fund investor letters Q2 2023 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.
