Seeking Alpha

Cabeza Howe

 
View as an RSS Feed
View Cabeza Howe's Comments BY TICKER:
Latest  |  Highest rated
  • First Internet Bancorp: On Track To Return To Growth And The Stock Is A No-Brainer [View article]
    Many thanks for catching that, Dr. Z. I'm also so amazed at how fast SA's Corrections Team responded even after midnight. Kudos, Seeking Alpha.
    Aug 21 09:05 AM | Likes Like |Link to Comment
  • First Internet Bancorp: On Track To Return To Growth And The Stock Is A No-Brainer [View article]
    Only that P/E ratio was so backward looking. Also, there's no reason why a profitable bank with earnings power to grow ahead to be trading at below book (in particular tangible book) at all.

    Had you used P/E on S&P in recent history, here's what conclusion you would have reached in early 2009: a market trading at P/E (ttm) north of 120 which was supposedly insanely expensive and you would have bailed or stayed on the sideline in one of the best buying opportunities in one's lifetime. P/E ratio by itself is insanely misleading, friend.
    Aug 20 04:16 PM | Likes Like |Link to Comment
  • First Internet Bancorp: On Track To Return To Growth And The Stock Is A No-Brainer [View article]
    Thanks for the comment, toddro. This is a grossly-misunderstood stock as of now and current share price is definitely a bargain. It does not make sense at all for it to trade below book value which is $21.25.
    Aug 20 11:36 AM | Likes Like |Link to Comment
  • First Internet Bancorp: On Track To Return To Growth And The Stock Is A No-Brainer [View article]
    Thanks, PJS. Nice to hear comments from a customer+shareholder. You are an example of a loyal customer who sticks with them because they are able to pass on the cost saving to you. Their average customer tenure is eight years. And you have been with them since inception. Congrats.
    Aug 4 03:06 AM | Likes Like |Link to Comment
  • First Internet Bancorp: On Track To Return To Growth And The Stock Is A No-Brainer [View article]
    Thanks for the kind words, k2climber. Good luck to your investments.
    Aug 1 08:51 PM | Likes Like |Link to Comment
  • First Internet Bancorp: On Track To Return To Growth And The Stock Is A No-Brainer [View article]
    You are welcome, Dr. Z. Thank you for reading.
    Aug 1 12:39 PM | Likes Like |Link to Comment
  • NQ Mobile Inc. -- An Analysis From A Long Holder: Why You Should Stay Away From This Stock Now And Going Forward [View instapost]
    Great article on NQ. But it surprised me that you had not even mentioned about the missing information (or data tampering) found in the Special Committee's "Independent Investigation." How would you counter MW's argument?

    http://bit.ly/1jzPkQ3

    To me, that argument appears to be fair, including why NQ has not released their report even in redacted form.
    Jun 18 09:04 PM | 1 Like Like |Link to Comment
  • First Internet Bancorp: At Least 70% Upside By The End Of 2015 [View article]
    With all my boilerplate disclaimer out of way, here are a few key growth parameters for WFC and INBK, respectively, in 1Q14:

    Growth YoY% in 1Q14:
    WFC: assets 8%, loans 4%, deposits 6%, net interest income 1%
    INBK: assets 30%, loans 49%, deposits 33%, net interest income 25%

    I have to say WFC's growth is amazing for its size. But INBK simply has an advantage when it comes to growth due to its tiny size.

    INBK's growth might not turn out to be as even as I have assumed. Given its eagerness to grow, I also do not really expect its NII to grow significantly faster than 25% I have assumed (because the company might be sacrificing pricing for volume a bit). But if it can maintain 15-25% NII growth for a few years while gradually normalizing its efficiency ratio to low 60s and 50s, I'm quite sure market will one day reward it with a higher P/B than WFC. Market has always rewarded consistent growers.

    For those doubting Mr. Becker's projection on normalization of efficiency ratio, recall that FIB (INBK's actual bank) reduced efficiency ratio from well over 70% all the way down to below 50% in a single year (from 2003 to 2004). Please refer to my other article on INBK.

    Mr. Becker is a successful serial entrepreneur with proven record. He also successfully sold a couple of his companies he had founded at nice premium. So, if one day he introduces one or two suitors for INBK I wouldn't be surprised either. But don't count on this to happen any time soon. I think he will grow this bank quite a bit larger than its current size before considering cashing out.

    So the 70% upside might come earlier or later, depending on macro factors, general market condition, and the actual path of growth at INBK. But I'm not any bit anxious. I have no doubt it's getting there in the not- too-distant future.
    Jun 15 10:29 PM | Likes Like |Link to Comment
  • First Internet Bancorp: At Least 70% Upside By The End Of 2015 [View article]
    I previously said:

    "From early 1995 through 2007 (right before financial crisis) P/B rarely fell below 2x. In the more bubbly years 1997-2002 P/B regularly traded above 3x. "

    That should instead be:

    "From 1997 through 2007 (right before financial crisis) P/B rarely fell below 2x. In the more bubbly years 1998-2001 P/B regularly traded above 3x. "
    Jun 11 02:38 PM | Likes Like |Link to Comment
  • First Internet Bancorp: At Least 70% Upside By The End Of 2015 [View article]
    Mingran, you have raised some good points here.

    Branchless and brick-and-mortar banking each has its own pros and cons. Yes, branchless online banks offer higher deposit rate to lure customers away from traditional banks. However, they simply can afford to do so when they don’t have the cost of owning/renting/operating the branches (note the personnel cost involved). Similarly, branchless banks reimburse ATM charges. But they again can afford to do that because they don’t have to incur the cost to own and maintain an ATM network.

    Then people were also questioning the stickiness of online banking customers. But like I pointed out in the article online banking was actually widely known in the banking industry to promote customer royalty and profitability. INBK stated this in its 10-K filing:

    “The average retail checking or savings account has been open with us for more than eight years. As a result, we are not dependent upon costly account acquisition campaigns to attract new customers on a continual basis."

    Refer to my article above also.

    And, as I pointed out in my article, the INBK story is not really just an online banking story. It’s increasingly also becoming a commercial lending story.

    Larger banks are more reliable and steady performers. But they will not be able to grow at the pace of a small bank like INBK. So all in all, you really need to balance both sides of a story, the pros and cons. I often remind myself: if you find a story that only has pros it’s probably the time to bail out. Promising returns all come with risk factors.

    Nobody can really predict the future. That’s for sure. But my 70% upside by the end of 2015 is conditioned on the continuation of 20-30% asset growth rate. If they can’t sustain the growth at this rate (while normalizing efficiency ratio) for the next two years all bets are off. Also, if they suddenly have to hugely increase provisioning for loan losses bottom line will be impacted. Their 10-K cites a whole list of risk factors, just like any other company's.
    Jun 11 02:15 PM | 1 Like Like |Link to Comment
  • First Internet Bancorp: At Least 70% Upside By The End Of 2015 [View article]
    I will NOT comment on your opinion on where the stock is going. I simply don’t have to care. But I do feel compelled to correct any misinformation contained in such comments.

    You said: “And that price was negotiated before the last two disappointing quarters at a time when everything looked very rosy. “

    Wrong!

    The company released its 3Q13 earnings on October 25, 2013:

    http://1.usa.gov/1kOYSuN

    The quarter marked the beginning of the refi. fiasco. Mortgage banking revenue tanked from $3.2 million in 3Q12 to $1.3 million!

    The pricing of the secondary offering occurred almost a month later, on November 22, 2013:

    http://1.usa.gov/1kOYTPh

    And by then the investing public has also been well aware of the nationwide refi. meltdown that had occurred since the summer.

    Yeh, I wish they had timed the offering better, like in August. However, almost all insiders (officers and directors) bought into this public offering at $20 per share. That included CEO David Becker.
    Jun 11 12:36 PM | 2 Likes Like |Link to Comment
  • First Internet Bancorp: At Least 70% Upside By The End Of 2015 [View article]
    Mingran,
    Thanks for reading my article and for your comments.

    (1) Secondary public offering (what you called “capital injection” http://goo.gl/aHORgq) completed in late November, i.e. in Q4. But in Q3 (before the capital event) loan growth was already 24%. And if you look at the first graph I gave, growth has picked up starting 2011 and accelerated ever since.

    (2) Banks fund asset growth (which includes loan growth) mostly from deposit growth (instead of tapping capital market). INBK raised $29.1 million in the secondary offering. However, assets grew $110 million in (4Q13 + 1Q14) combined. This included $31 million growth in their (cash & cash equivalents + time deposits).

    (3) Their capital ratios are very healthy, with tons of buffers. For example, at the bank holding company level as of end of 1Q14, their tier 1 capital to risk weighted assets ratio was 15.14% versus minimum regulatory capital requirement of 4%.

    (4) History should give us some clue on valuation. Let’s use historical S&P 500 financial companies’ P/B ratio as a reference. From early 1995 through 2007 (right before financial crisis) P/B rarely fell below 2x. In the more bubbly years 1997-2002 P/B regularly traded above 3x. In the bargain years from 1982 through 1996 S&P 500 financials traded mostly in the range of 1x to 2x P/B range, with median at about 1.5x level. Note that these companies as a whole grew at a far lower rate than INBK is currently growing. Assuming 20% or so of asset growth rate for the next five years, a P/B of >2 would be very reasonable based on the past three decades of history.
    Jun 10 11:39 PM | Likes Like |Link to Comment
  • What A Successful Moema Launch Means For Solazyme [View article]
    Note that Faber works for EWG (an anti-GMO organization), though ironically he has worked as a GMA lobbyist before. And DeFazio is one of the original sponsors of the Boxer-DeFazio GMO-labeling bill (S.809):

    http://1.usa.gov/1pcIkje
    (which is a mandatory GMO labeling law championed by anti-GMO groups, also described in the politico article.)

    So maybe their comments need to be taken with a grand of salt? That said, you were certainly right NOT to be optimistic about H.R.4432’s prospects of becoming law. But at least, it will serve as a balancing force against S.809 and state-level efforts on GMO labeling. It appears neither S.809 nor H.R.4432 might actually become law. (S.809 has more cosponsors but it is also one year older than H.R.4432) But you never know.

    The scene out there looks a bit scary when you consider that “Labeling efforts are underway in some 20 other states”:
    http://nyti.ms/1pcImHJ

    Were I a junior trader, I would have been scared to death. But I have learned to be contrarian. It’s no different than buying stocks in early 2009 and in the depth of Eurozone crisis two to four years ago. And a key thing to remember is that the industry has the full support of the executive branch of the U.S. government. Another key factor is the war chest the food and other consumer products industry have. So, there’s a reasonable chance that a bulk of those 20 other states would be just another California or Washington. The stock performance of MON might just be a good indicator.

    It’s sad that an innovative industry that promises to feed, save, and change the world is demonized to such an extent. As if they were operating a scam or criminal industry such that they had to avoid terms like “genetically engineered” and “synthetic biology.” I actually read one article that characterized the food and biotech industries’ effort around labeling as “criminal.” This should go down as a dark chapter in the history of tech innovation.
    Jun 9 12:01 PM | 3 Likes Like |Link to Comment
  • What A Successful Moema Launch Means For Solazyme [View article]
    Roger Knights,

    This ETC/Ecover incidence is not really just about sugarcane acreage, environment, farmer interest, etc. The way I see it, it is part of the anti-GMO, anti-SB fundamentalist movement. It is only a tiny piece of their long-term effort to kill GMO and SB industries. They will constantly find issues to make themselves heard around the world.

    The fact “ONLY” 17 groups signed the letter was that the issue they are raising now is narrow in scope and does not justify a larger-scale movement. They were not dealing with food poisoning, and they were not dealing with GMO/SB environmental accidents, and so on. In other words, the catalyst was not huge enough for them to obtain signatures from more groups. So, I DON’T really believe there’s anything here that really can prove ETC’s ability to gain more traction.

    So to argue that “their concern should soon be mollified” once they understand the “sugarcane acreage” issue is naïve. And it’s irrelevant how the ETC/Ecover incident winds down. They will always find and raise other issues.

    The anti-GMO, anti-SB fundamentalism is a united course. It’s actually VERY powerful. It has got the entire EU to basically turn its back on GMO foods for longer than a decade now, even though that EC and others in power were fully aware that there’s no convincing evidence that GMO has posed any health hazard. The fundamentalism has even succeeded in confusing U.S. consumers that the majority of them believe there’s a need for them to know which products are GMO’ed.

    And that’s why I was hedged when I mentioned about that whoever running the SB industry will eventually make a wise call. I intentionally said “I’m fine with whatever route they are taking” hinting that they might actually go with the labeling approach. And that ultimate decision was actually up to the industry’s partners, i.e., the consumer goods companies. And that in turn was because of the success of the fundamentalism. (It is also consumers; but it’s consumers who were misled and confused by the fundamentalists.)

    In January there’s a report that the food industry was working to voluntarily label their products:

    http://politi.co/1pT3FOA

    The end of the article pointed to a brilliant solution: get the government to approve GMO food and put a stamp on its safety so consumers have the confidence that what they are consuming is safe. It’s all about consumer confidence!

    And there’s a hope now, with the introduction of the Safe and Accurate Food Labeling Act:

    http://bit.ly/1pT3ItQ
    http://1.usa.gov/1pT3ItS

    The power to label or otherwise now would rest with the federal government and all state-by-state, piecemeal labeling laws will be pre-empted. (And I don’t interpret it as outright labeling law either in its current form.)

    If that law gets to pass, it would be a major victory for the food industry, and the GMO/SB/biotech industry by extension.

    I actually feel quite flattered by your “^be vague and evasive^ advice” interpretation. And I was also delighted to be put side by side with Nathanael Johnson, who’s an expert observer in the area. I have never thought I’m qualified to give any advice to the industry or even just Solazyme the company.

    I also acknowledge that it is beyond my scope and knowledge to predict how the anti-GMO/anti-SB movement and the regulatory environment will evolve in the future. (The only thing I can say is that I don’t like labeling, which is wrong, unfair to GMO/SB/consumer products industries, and it is misleading consumers.)

    I’m just a trader or investor trying to interpret what Solazyme, Ecover and other industry partners have done. And how that might impact my investment.

    I was just commenting on Ecover’s response to ETC. On that issue I’m glad you now agree with me. This long-winded discussion was very accidental and beyond my imagination!

    I should also say that my knowledge is limited, and English is also my second language so there might be wording issues involved also. In one of my response to you, I had to weigh whether I should use could/might/should to really deliver what I wanted to say.

    As such, don’t feel the urge to rebut me sentence by sentence. But if you choose to continue the course, by all means do it. Only that there’s no guarantee I will read more of your rebuttals.
    Jun 8 12:16 PM | Likes Like |Link to Comment
  • What A Successful Moema Launch Means For Solazyme [View article]
    See these also:

    http://bit.ly/1i9KDMo
    http://bit.ly/1i9KDf8
    Jun 6 06:47 PM | Likes Like |Link to Comment
COMMENTS STATS
253 Comments
206 Likes