Collyn Gilbert is Managing Director of Keefe, Bruyette & Woods, Inc. Ms. Gilbert is currently a Managing Director with KBW/Stifel covering small- and mid-cap banks in the Northeast. Prior to joining KBW in 2013 when it was acquired by Stifel, Ms. Gilbert was Managing Director at Ryan Beck & Co., covering regional banks throughout the Northeast.

In this 2,912 word interview, exclusively in the Wall Street Transcript, Ms. Gilbert makes a case for her top picks in 2020.

Her picks are very interest rate sensitive:  “The movements in the yield curve and in interest rates are really a heavy, heavy factor in how banks and, in particular, my universe of smid banks perform.”

New York State has an additional set of challenges:

“This was a particular setback for the NYC real estate market, given the large concentration of rent-stabilized properties in NYC and the interconnectedness these properties have with the overall strength of the real estate market in NYC.

These new laws have eroded the return profile for the property owner, which then has eroded the desirability for this asset class, which then lowers demand and overall activity in the sector, and that has negatively impacted the overall loan activity for many of the banks in the NYC metro market.

The other law that has impacted the real estate market in NY state was the SALT deduction that was implemented in 2018. This tax limits the property tax deductibility, which has, again, negatively impacted the real estate profile for the higher-property-tax regions of NY state.”

An additional challenge is on the technology side:

“At the large-bank level it is, but there still seems to be a large gap there to what the community banks are doing. Many banks are still in the initial stages of rolling out mobile products, online account opening capabilities and just moving to more sophisticated data management platforms.

So while we are happy to see these banks implementing these technologies, sometimes you want to say, “You should have had done that five years ago.”

Get the complete picture on all the Keefe, Bruyette & Woods picks from this experienced analyst by reading the entire 2,912 word interview, exclusively in the Wall Street Transcript.

Paul D. Tobias is Chairman of mBank and Chairman and CEO of Mackinac Financial Corporation. Mr. Tobias has nearly 42 years of experience in the financial services and banking industries.

He was appointed as Chairman of mBank and Chairman and CEO of Mackinac Financial Corporation in December 2004 after structuring and leading the successful $30 million recapitalization of the company when it was known as North Country Bank and Trust.

Kelly W. George is President and Chief Executive Officer of mBank and President of Mackinac Financial Corporation. Mr. George has over 25 years of experience in the banking industry.

He joined mBank in 2003 as the Executive Vice President and Chief Lending Officer in charge of the regulatory and lending administration turnaround of the previously known North Country Bank and Trust.

After the successful rehabilitation of the bank and $30 million recapitalization, he was promoted to President and CEO of mBank and President of Mackinac Financial Corporation in 2006.

In this 3,355 word interview, exclusively in the Wall Street Transcript, these two experienced banking leaders detail what it takes to be successful in their market.

Mr. George elaborates on the financial technology side:  “We run most of our operations and our platform through Fiserv, which is our core processor. We have to work within that platform.

Fiserv is a large public fintech company servicing a large variety of financial institutions, and we think that platform is really going to continue to keep us on the front end of the tools that might be available or the new product and service trends to compete on the technology side.”

Mr. Tobias adds:

“Banking is a commodity. The products and services from bank to bank don’t vary greatly. The bottom line is it comes down to culture and people.

We have people who are part of the communities we operate in. We have developed a culture that is very community- and client- and employee-focused.”

Get the complete 3,355 word interview with Paul D. Tobias, Chairman of mBank and Chairman and CEO of Mackinac Financial Corporation, and Kelly W. George, President and Chief Executive Officer of mBank and President of Mackinac Financial Corporation, exclusively in the Wall Street Transcript.

 

David J. Nasca is President and Chief Executive Officer of Evans Bancorp, Inc. Mr. Nasca joined the board of directors of Evans Bancorp in September 2006 and subsequently joined the management team as President in December 2006, bringing more than 20 years of experience in the Western New York financial services and banking community. He was appointed CEO in April 2007.

In this 2,873 word interview, exclusively with the Wall Street Transcript, Mr. Nasca explores the upside for an upstate New York based banking institution:

“The company is diverse, but it is primarily a commercial banking institution. Additionally, approximately 30% of our revenue is noninterest income, with about half of that attributed to our insurance business.

Noninterest income also includes cash management products and employee benefits.

We recently announced a definitive merger agreement to acquire FSB Bancorp, the parent of Fairport Savings Bank, with $325 million in assets and five branches in the Rochester market. Expanding to Rochester had been prioritized as part of our strategic planning and is accelerated by this opportunity.”

The digital revolution in financial technology has profoundly affected smaller banking companies:

“What many banks are doing now is looking for companies they can partner with. And when I say partner, there are companies, like nCino and Sageworks, that will allow you to do a lot more digitally.

They have portals, so borrowers can come directly to the bank by delivering financials and information through a portal.

You can go into that portal, strip the information and then populate loan applications and credit write-ups. You can do some scoring from those systems. You can do underwriting through those systems.

So there is a lot of efficient digital that the smaller institutions are using, whether it’s consumer mortgage and home equity type of technology, commercial loan technology or deposit technology.

We are a midsize community bank with just under $1.5 billion in assets. You are seeing the ability starting to develop for banks like us to acquire or partner with new fintech companies. There is a lot of research being done, but I think it is in the early stages.”

Read the entire 2,872 word interview and get the complete picture, only in the Wall Street Transcript.

Scott Hood serves as the Chairman and Portfolio Manager of First Wilshire Securities Management Inc. He joined First Wilshire as an analyst in 1993, became the CEO in 2001 and the Chairman in 2019.

He is a board member of The Mount Wilson Observatory and The Sierra Madre Mountain Conservancy as well as a frequent contributor to news and conferences on small-cap investing. He is a chartered financial analyst and member of the CFA Institute.

Mr. Hood holds a Bachelor of Science from The Stern School of Business at New York University.

In this 3,683 word interview, Mr. Hood explains the deep value philosophy:

“Everybody here is deeply value-oriented and favoring the smaller-cap side, though maybe 10% to 20% of the ideas could be mid or large but where they have good value characteristics and are typically hated, real contrarian stocks that are down a lot for one reason or another. There’s always been an element of contrarian plays.”

The fund manager identifies some interesting picks:

“I’ll give one that’s a really good example of deep value. This would be even more value than usual. It’s called Gulf Island Fabrication (NASDAQ:GIFI). The company has been around a long time but is in what I would definitely call turnaround mode. It’s probably been on a decline for roughly 10 years.

What they do is fabrication of large complex steel structures like offshore drilling rigs and shipbuilding such as tugboats and ferries. The company has been on a decline. We’ve been following it for probably over five years. We finally felt earlier this year it was time to get in.

They changed management. They are very near going to cash flow breakeven. We like the new CEO. The backlog is at a record level, at least the best in about eight years. What’s neat is it’s trading near cash and below current assets less all liabilities, which is known as a net net stock; there are not many net net stocks out there. They also have some assets up for sale that could add to that cash. You don’t get many companies like that.

It’s also trading at 40% of book value.”

To get all the current top picks, read the entire 3,683 word interview with Mr. Hood, only in the Wall Street Transcript.

Jonathan Dash is the Founder and Chief Investment Officer at Dash Investments, Inc. As Chief Investment Officer, he is responsible for all the investment management and asset allocation decisions at the firm. He has over 25 years of experience in investment management.

Between 2006 and 2010, Mr. Dash was on the board of directors of Western Sizzlin Corporation, a 50-year-old franchising company with over $150 million in systemwide revenue. Mr. Dash graduated from the University of Southern California with a B.S. in finance and has also completed a Harvard Business School program on corporate restructuring, mergers and acquisitions.

In this 4,279 word interview, Mr. Dash explains how buying dinner for Warren Buffett 27 years ago pays off for this fund manager:

“That year, which was about close to 27 years ago, I flew out to the Berkshire Hathaway (NYSE:BRK.A) annual meeting just to learn more. I really gravitated toward Warren Buffett’s investment philosophy. It made a lot of sense. He was the best investor in the world. And that’s a good source from which to learn.

So I went to that annual meeting. I got to meet Warren Buffett that year, and I was able to speak to him for a while, asking him many questions. He was kind enough to let me pick up the tab for his dinner that year for him and his family. I think he just saw a young kid who was looking to him and was OK with me doing that.

It’s been a tradition for the last 27 years. I go to that annual meeting every year. I see Warren Buffett at the steakhouse every year. He lets me pick up the tab. And every year, I’ve been able to ask him a few questions to brush up on my investment strategy and get a lot of good book recommendations.

I learned a lot out of that and taking that investing approach, which is really buying a great business with a great management team at a great price. ”

This fund manager believes the times call for more equity exposure:

“I think a lot of people out there have too much exposure to fixed income. When you read academic books on this topic — how much stocks you should have in your portfolio versus bonds — there’s a formula based on your age. And if you’re 80 years old, you should have 60% or 70% in bonds and 30% in equities or something of the sort.

That might be OK in a normal interest rate environment, somewhere between 5% and 8%.

But we’re in a very abnormal environment.”

Read the complete 4,279 word interview and get all the stock recommendations from this Warren Buffett inspired fund manager.

Arnim S. Holzer is Global Macro Strategist, Client Portfolio Manager and Founder of the EAB Correlation Defense Index at EAB Investment Group.

With over 30 years of global macro and multi-asset experience, Mr. Holzer’s investment philosophy is a unique blend of fundamental, technical and quantitative disciplines honed over the years of working with many of the top firms and investors in each of these disciplines.

His particular macro skill is understanding the relationships of correlation and volatility in the optimization of portfolio construction and return generation. Mr. Holzer received an undergraduate economics degree from Princeton University and his MBA in finance from Fordham University.

In this 4,093 word interview, exclusively in the Wall Street Transcript, Mr. Holzer reveals the portfolio management insights he has gained in over 30 years of investing.

“While equities have an upward skew over time, there is a tendency for equity markets to have unanticipated sharp declines on a sporadic basis. As a result, there can be a tendency for equity investors to over-invest close to the end of a bull market and then get severely penalized for drawdowns.

What we have found over time is that there’s a fair amount of inefficiency in the options markets around some of these assumptions that skew, and volatility doesn’t always correctly price in those realities.

Investors that take a disciplined systematic approach to managing their signatures, their returns signature, can actually over time generate better Sharpe ratios than the underlying equity market itself.”

This portfolio management technique has proven itself over time:

“The second point is that we try to make the investor’s ability to stay with their asset allocation stronger. We come out of a school of thought that investors behave emotionally.

The professionals here are all 25- and 30-year market professionals, and we lived through 1987, we lived through the 2008 market crash, the Lehman crisis, the Great Recession.

What we looked at is what really happened to investors during those periods of time. When you look at passive investment strategies, they always test well because they assume that investors hold, that they buy low and sell high.

But what we know behaviorally is, in fact, and if you look at the Dalbar studies — there’s some controversy around those, but even adjusted studies show that investors have a tendency, when the markets get into that 5% drop territory, investors have a tendency to start selling.

So they sell low, and they buy high. That is a problem with passive investing that the studies never take into account.

Our structure, on the contrary, basically has sold the market in that 2% to 7% area. So we’re collecting profits. We’re collecting offset when the market goes down between 2% and 7%, and we over-defend to 150% of the fund’s exposure. So 1.5 times our notional is what we’re defending in that range.”

Get the complete picture of this return winning portfolio management system by reading the entire 4,093 word interview, exclusively in the Wall Street Transcript.

Brendan J. Hartman is a Portfolio Manager at Royce & Associates, LP. Prior to joining Royce & Associates, Mr. Hartman co-founded and managed a hedge fund for Rebus Partners.

Prior to that, he was employed by Cramer Rosenthal McGlynn, LLC from 2001 to 2008 and served as Co-Manager for the Mid Cap, Smid Cap, 130/30 Fund and CRM Partners LP funds.

In this 3,114 word interview, exclusively in the Wall Street Transcript, Mr. Hartman describes his firm’s investing philosophy as well as several specific stock picks for investors.

“My partner Jim Stoeffel and I co-manage the microcap fund. We have two funds — an open-end and a closed-end microcap fund — but beyond that, microcaps are spread throughout the small-cap funds.

For instance, that Pennsylvania Mutual Fund that John referenced, there’s a fair amount of microcap stocks in that.

We define microcap as sub-$1 billion market cap. And it’s an interesting asset class because, as the amount of sellside analysts on Wall Street continues to shrink, there are fewer and fewer analysts covering these stocks or writing research on and publishing earnings estimates.

So the market, I think, becomes less efficient, which we like because we’re trying to find mispriced stocks and improving fundamentals that the market is not paying attention to or hasn’t caught on to yet.

As far as our investment philosophy, ideally, we’re looking for a good business defined by a high return on capital or a high operating margin with some sort of a competitive moat or a competitive differentiator that’s going to allow them to sustain those higher returns.

And then, we’re looking for a management team who can reinvest the free cash flow that they generate and maintain that return and grow the business. That’s ultimately a home run for us.”

One of the many examples detailed in the interview excites Mr. Hartman’s investing passion:

“Sure, I’ll give you a different company but also something that we think is quite attractive. It’s a steel company called Universal Stainless & Alloy Products (NASDAQ:USAP), and what these guys do is primarily nickel-based alloys.

They’re used in higher-end applications like aerospace and defense, some smaller industrial gas turbine applications, some chemical plant applications.

And it’s not traditional carbon steel; it’s much higher-end nickel-based alloys used in corrosive environments, high-temperature and high-stress environments.

Here, the investment case is it’s just extremely cheap. It’s trading at about 50% of tangible book value. They’ve struggled a bit with the downturn in oil and gas and the downturn in large industrial gas turbines, but their business is 65% aerospace, and that continues to grow.”

Get the rest of the detail on this and many other microcap investing ideas, exclusively in this 3,114 word interview, only in the Wall Streeet Transcript.

Jason Benowitz, CFA, joined Roosevelt Investments in 2009 as a Securities Analyst, was promoted to Portfolio Manager in 2011 and to Senior Portfolio Manager in 2013.

Prior to Roosevelt, Mr. Benowitz was a principal at Druker Capital, a long/short hedge fund manager, and a vice president in the U.S. Equity Research Group at Morgan Stanley Investment Management.

He was also an investment banking analyst at Merrill Lynch.

Mr. Benowitz received a B.A. in computer science from Harvard University and an MBA in finance and accounting from The Wharton School at the University of Pennsylvania, where he was a Palmer Scholar.

In this 3,877 word interview, exclusively in the Wall Street Transcript, Mr. Benowitz details his investing philosophy which has generated some top performing stocks for his investors.

“At Roosevelt, our investment philosophy puts capital preservation first. Our clients come to us with substantial wealth, and our job is to keep it that way. If we can outperform in bear markets and at least keep pace with rising markets, then we will outperform over a full market cycle with less volatility.”

One example of this type of investing has Mr. Benowitz pounding the table:

“Within the 5G theme, one stock we like is Keysight (NYSE:KEYS). It has a $20 billion market capitalization. Keysight is a leading test and measurement company in the communications market. It was a spinoff of Agilent (NYSE:A), which itself was a spinoff of Hewlett-Packard (NYSE:HPE).

Since becoming an independent company about five years ago, Keysight has increased its investment in both research and development and front-line sales staff.

It reorganized by end market instead of by product and evolved from selling discrete testing units to integrated solutions that incorporate hardware, software and services. We expect the company to reap the fruits of these investments in the coming years.

Most notably, we expect the global rollout of the 5G communication standard will drive outsized growth at Keysight from testing equipment and services across handset components, cellular base stations and telecom networks.”

To get the rest of this top portfolio picks read the entire 3,877 word interview, only in the Wall Street Transcript.

Christopher E. Herald is CEO, President and Director of Solitario Zinc Corp. Mr. Herald has over 40 years of experience in the mining industry.

He was responsible for the formation of Solitario in 1992 and has directed the company since then. He was instrumental in discovering the 1.5 million-ounce high-grade Buckhorn Mountain Gold deposit and its subsequent sale to Kinross Gold for approximately $240 million in 2006.

In his exclusive 2,623 word interview, only in the Wall Street Transcript, this seasoned mining industry veteran discusses the development of his company for investors.

“Solitario has made a lot of progress in the last 12 months. I think by far the most important is the work that our partner Nexa Resources has done on our Florida Canyon zinc project in Peru. There, we’ve just completed a 17,000-meter drilling program, the largest drilling program in the history of the project.”

“One of the potential new major uses of zinc could be what’s called zinc-air batteries. Everybody’s going to battery storage, cars, in just about anything you see, people are trying to equip machinery with battery power.

Now, zinc isn’t a light metal compared to lithium. It’s not going to replace lithium in terms of car batteries, but what zinc-air batteries can do, they can store large amounts of electricity — for instance, for power plants such as for solar and wind generation.”

“I’m not concerned about the projects themselves; they’re very solid. They’re two of the three highest-grade zinc deposits held by juniors in the world.

Both Florida Canyon and Lik are 12%-plus deposits in terms of zinc grade, where the average zinc mine in the world today produces at an average grade of maybe 5% zinc, at most. And our two projects are 2.5 times that grade, so the projects don’t have a lot of risks to them.”

Get the complete 2,623 word interview, only in the Wall Street Transcript.

Stefan Ioannou, Ph.D., is Analyst of Cormark Securities Inc. Dr. Ioannou is a mining engineer and holds a Ph.D. in economic geology from the University of Toronto.

He joined Cormark in December 2016, working in equity research for 13 years with Haywood Securities — base metals analyst since 2006. Prior to that, Dr. Ioannou worked as an exploration geologist in Nevada and throughout the Canadian Shield.

In this exclusive 2,882 word interview with the Wall Street Transcript, Dr. Ioannou reveals his insight into near term metal prices.

“One of the things that we’re hearing a lot more about is electric vehicles and what they mean for metal consumption in general, and obviously for copper.

When you think of copper, you should think of electrification. And so that obviously fits right into the electric vehicle narrative. Copper consumption, as it pertains to EVs, is definitely a new emerging demand.

But to put it in perspective, the numbers that are out there right now suggest that incremental EV-related copper demand over time is going to be on the order of about 2 million to 3 million tons per annum.

Current global copper consumption is around 23 million tons per annum, so incremental EV usage stands to boost overall demand by about 10%.”

Some top stocks will benefit from this economic trend:

“One name that comes to mind is Trilogy Metals. They have a project in Alaska called Arctic, which is an advanced-stage project, very high grade.

It will produce copper, zinc and lead, as well as precious metals. A key thing here is that the project is relatively remote, so it will require about a 340-kilometer-long road to access it.

Work with the government is already well-underway to get that road permitted, and we should be seeing a sightline to those permits by early next year. Once in hand, it’ll be a significant catalyst for the project going forward.”

Get the complete recommendation list in this exclusive 2,882 word interview, only in the Wall Street Transcript.

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