A (premium) net cash play

Sometimes, an entire sector in the market is so out of favor that the opportunity set can be overwhelming. For example, on the heels of the First Republic / Silicon Valley blow up in the Spring of 2023, almost every regional bank traded below tangible book value. With one or two exceptions, you could have closed your eyes and bought any of them and done well…. and that statement is not just hindsight bias talking! Multiple industry executives were noting something similar; for example, I mentioned CFG’s CEO giving this quote in the middle of 2023:

It looks like a screaming buying opportunity when you can buy these banks at tangible book or even below a little bit. Historically, you've made a killing. That should restore itself. You put in your notes about how the relative valuation to the S&P is kind of at an all-time low. If you go back 100 years, it's probably as low as it's ever been.

If you’ve been following the (premium) side of this blog this year, you’ll know I’m starting to get the same “throw a dart and you’ll probably do well” feeling about one sector right now: