News of SVB Financial Group and Signature Bank failing in the U.S. has likely brought back some dark memories of the 2008 financial crisis. Fortunately, it looks like some lessons were learned back in 2008 by institutions, primarily the idea of acting fast and ‘more is better’ when looking at the range of solutions.
In periods of higher volatility and indiscriminate selling, you can often find companies that have been unduly sold off. Meanwhile, given that events in the financial sector are still very ‘live’ we want to exclude this space to focus on companies that are less likely to have material exposure to the various banks and further cockroaches that may lie in the shadows.
Fundamentally, it is hard to find much to pick on. Growth and margins are strong, debt is low, and return on equity metrics are quite attractive. Shares do trade at a premium of 29 times forward earnings but this is not out of line from where shares have traded on the past and arguably on the lower side of historical ranges.
While markets are efficient over longer periods, they can drift too far in either direction in the short-term and even more-so in times of fear. The good ‘deals’ that investors dream of don’t come around when everything looks good, healthy, and stable. They come in times of discomfort, volatility, and uncertainty.