Giverny Capital, an investment management company, recently published its fourth-quarter investor letter in 2022. A copy of the same can be downloaded here. The model portfolio of the firm appreciated 8.49%, net of fees in the fourth quarter compared to a 7.56% return for the Standard & Poor’s 500 Index. For 2022, the fund delivered a -22.65% return compared to a -18.11% return for the Index. Oil and energy was the strongest sector in the year increased by 65%. In addition, you can check the top 5 holdings of the fund to see its best picks for 2022.
Giverny Capital highlighted stocks like First Republic Bank (NYSE:FRC) in its Q4 2022 investor letter. Headquartered in San Francisco, California, First Republic Bank (NYSE:FRC) is a financial company that operates through Commercial Banking and Wealth Management segments. On January 26, 2023, First Republic Bank (NYSE:FRC) stock closed at $138.77 per share. One-month return of First Republic Bank (NYSE:FRC) was 13.85%, and its shares lost 17.89% of their value over the last 52 weeks. First Republic Bank (NYSE:FRC) has a market capitalization of $25.395 billion.
Giverny Capital made the following comment about First Republic Bank (NYSE:FRC) in its Q4 2022 investor letter:
“First Republic Bank (NYSE:FRC) serves affluent customers in some of the country’s wealthiest areas: the Bay Area, Manhattan and Palm Beach among them. It provides attentive service and takes almost no credit risk on loans. A typical First Republic loan might be for 50% of the purchase price of a luxury home in Silicon Valley to an executive whose net worth is multiples of the value of the home. The bank has more than doubled revenue and net income over the past five years. In 2022, it grew household relationships by 15%, a remarkable number for a bank. But First Republic also got pinched in 2022 by the phenomenon of interest rates rising faster for short-term loans than for long-term loans. This happens because the market expects a recession: it costs more to borrow money for a year than for 10 years. For First Republic, this means it is paying high rates on Certificates of Deposit (CDs) to customers, but then lending that money to long-term borrowers for only a bit more yield. Banks depend on a healthy spread between their cost of deposits and what they earn on loans. Lately, First Republic’s net interest margin has been disappointing. Still, earnings per share grew about 7% in 2022.
The inversion of the yield curve may continue to pinch earnings growth in 2023, but longer-term First Republic continues to attract affluent customers and, as such, to grow low-risk loan volumes. When you don’t have credit losses and you do have steadily growing loan volumes, income should rise over time.
With cash on hand and the proceeds from the sale of ICE in the fourth quarter, we invested more money in existing holdings First Republic Bank, M&T Bank, Carmax, Floor & Décor and SS&C. We ended the year with about 2.5% cash.”
Photo by micheile dot com on Unsplash
First Republic Bank (NYSE:FRC) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 39 hedge fund portfolios held First Republic Bank (NYSE:FRC) at the end of the third quarter, which was 35 in the previous quarter.
We discussed First Republic Bank (NYSE:FRC) in another article and shared the list of stocks whose price targets were recently trimmed by analysts. In addition, please check out our hedge fund investor letters Q4 2022 page for more investor letters from hedge funds and other leading investors.
Suggested Articles:
- 15 Stocks That Have Increased Dividends for 25 Years
- 18 Countries that Produce the Most Nuclear Energy
- 12 Best Low Priced Dividend Stocks To Buy
Disclosure: None. This article is originally published at Insider Monkey.
