Each week on Industry Focus: Financials, host Jason Moser and Fool.com contributor Matt Frankel discuss two stocks that are on their radar. In this installment, Matt explains why he has his eye on New York Community Bancorp (NYSE:NYCB) despite dismal stock performance, and Jason shares why he's watching Markel (NYSE:MKL) as it gets set to announce its third-quarter results.
A full transcript follows the video.
This video was recorded on Oct. 22, 2018.
Jason Moser: Matt, as we do every week, we're going to wrap up here with One to Watch. Again, earnings season is in full throttle now. What is your one to watch for the coming week?
Matt Frankel: I'm watching New York Community Bancorp, ticker NYCB. They're a regional lender based in New York. Their primary business is loaning out on rent-controlled New York apartment buildings. The reason that I'm really interested in what they have to say is, they're a business that does not react well to higher interest rates, in contrast to many banks. They have a higher cost of capital. Most of their deposits are interest-paying. Their loan portfolio is mostly these loans on rent-controlled buildings, and there's not much demand for those when interest rates start to rise. So, they're stuck with this portfolio of loans that were made when interest rates were really low. Their cost of capital starts rising. So, their stock has just been pummeled lately. Now it pays almost a 7% dividend. It should be a big beneficiary of the bank reform bill, because they're right in that $50 billion asset range that got deregulated. I was a shareholder. I got rid of it a little while ago, but I might jump back in, depending on when things look like they're going to start to turn around.
Moser: Great! I'm going to take a look at Markel Insurance, ticker MKL. They're slated to release earnings on Wednesday the 24th. I'm sure most listeners are familiar with the name Markel. It's what we commonly refer to as our baby Berkshire, an insurance company built very much in that same mold. I own shares, very happy to own more if I ever get the opportunity to buy at a compelling valuation. And it, too, is a member of that small business big investment basket that I put out a little while back. I'll be interested to see what Tom Gayner and company have to say on Wednesday.