A Case for Concentrated Portfolios

Will Gold Denver Colorado 100 Capital PartnersHere is an article that will provide some in-depth background and a case for concentrated portfolios.  Its a good read.

With the rise of the Modern Portfolio Theory, for more than five decades diversification has been inherent to portfolio construction. However, this trend has evolved into what may be deemed over-diversification—where securities are included in a portfolio to dampen volatility rather than because of fundamental stock picking. We believe the inclusion of a security in a portfolio should be driven by high conviction in the underlying investment idea.

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Shrinking the float

BAC massive buyback provides price support and downside protection, continuing for years. It’s a great read.

The Federal Reserve unconditionally approved Bank of America’s 2017 capital return plan as a part of its annual stress test for the country’s biggest banks (see Fed Clears Capital Plans Of All U.S. Banks Subject To Stress Tests For The First Time In Seven Years). Following the approval, the diversified banking giant announced plans to hike its quarterly dividends by 60% – from 7.5 cents now to 12 cents a share beginning Q3 2017. The bank will also repurchase $12 billion worth of its common shares over the next twelve months, and has also set aside an additional $0.9 billion to repurchase shares to offset an increase in shares from its stock-based employee compensation plan.

Bank of America’s capital return figures for each year since 2005Given the bank’s roughly 9.95 billion outstanding shares, the 2017 capital plan entails a payout of almost $17 billion to investors over Q3 2017 – Q2 2018. This is more than double the $8 billion figure announced by Bank of America as a part of its 2016 capital plan. We are currently in the process of updating our price estimate for Bank of America’s stock in light of its better-than-expected capital return plan.

See entire article in Forbes by clicking here.


Making $12 Billion

Still significantly undervalued with fundamentals and macro environment improving quarterly.  Write OTM covered calls, over them, to create additional income.  With the premium and dividend create a positive carry.

Warren Buffett’s bet on Bank of America Corp. is about to pay off with a roughly $12 billion windfall.

Warren Buffett Bloomberg Will Gold 100Capital Partners Denver ColoradoThe billionaire plans to exercise warrants obtained six years ago in a vote of confidence in Bank of America while its shares were tumbling amid multibillion-dollar probes tied to the housing meltdown. The cash infusion helped the bank put to rest doubts about whether it had enough capital, and its shares have more than tripled since then.

In the 2011 deal, Buffett’s Berkshire Hathaway Inc. invested $5 billion in Bank of America in exchange for preferred stock and the right to buy 700 million common shares, a stake now worth $17 billion. Berkshire said in a statement Friday that it would convert its preferred shares into common stock once the Charlotte, North Carolina-based bank increases its dividend, now planned for the beginning of the third quarter.

Buffett laid out his thinking for the conversion, which will make him the company’s biggest shareholder, in a February letter to investors, saying that the decision would come down to simple math: The preferred investment pays $300 million a year in dividends, so it makes sense to convert that into common stock if those shares began earning more.

See the entire article by clicking here.

Written by Noah Buhayar and Katherine Chiglinsky