Daniel O'keefe on banking sector
From Daniel O'Keefe: Morningstar International Stock Fund Manager of the Year · · WEALTHTRACK
“Banks were at a low price to earnings multiple. So were they cheap? They were statistically cheap, but were they truly cheap? Because this business is as much about risk as it is about reward. The leverage is 20 times. The businesses have been growing their loan books without interruption. They haven't taken any reserves against potential credit risks. There's a lot of risk in there. So a low price to earnings multiple doesn't necessarily indicate true value because those earnings are arguably peak, and because they're so levered, if something bad happens, then you stand to get wiped out.”
On , Daniel O'keefe, MD and Lead Portfolio Manager of Global Value & Select Equity Strategies at ARTISAN PARTNERS ASSET MGMT, spoke about banking sector during Daniel O'Keefe: Morningstar International Stock Fund Manager of the Year on WEALTHTRACK.
About Daniel O'keefe
In a 2014 interview, Daniel O'Keefe discussed his value investing approach, describing it as seeking businesses that are cheap relative to long-term intrinsic value, have a competitive advantage, a strong balance sheet, and a management team aligned with shareholders. He noted that after significant market gains in 2013, many bargains had been "wrung out of the market," but he found emerging markets attractive due to their low price-to-earnings multiples relative to developed markets. O'Keefe also highlighted specific holdings, including financial stocks such as American Express, BNY Mellon, ING Bank, Lloyds Bank, and Royal Bank of Scotland, which he said were added during or after the financial crisis. O'Keefe used Google as an example of distinguishing between statistical cheapness and fundamental undervaluation, noting that the firm bought it at 12 times earnings in 2008. He criticized Google's corporate governance and capital allocation decisions, such as the Motorola acquisition and the purchase of Nest, while acknowledging the strategic rationale behind investments like Android. He also discussed the risks in banks, stating that low price-to-earnings multiples do not necessarily indicate true value due to high leverage and potential credit risks.