Commentary: HFMU.U

Notes from Atlanta: (Growth, M&A) Going Strong

In the almost two years since our last trip to Atlanta, a lot has changed in the banking sector (M&A) and a lot has not (strong growth). The opportunity to speak with 8 banks operating in and around Atlanta – several of which are holdings in the Hamilton Capital Global Bank ETF (HBG) and the Hamilton Capital U.S. Mid-Cap Financials ETF (USD) (HFMU.U) – provided some…

U.S. Banks: Mid-Caps vs. JPM, BAC, C & WFC – Higher EPS Growth at Deeper Valuation Discounts

At present, the actively-managed Hamilton Capital U.S. Mid-Cap Financials ETF (USD) (ticker, HFMU.U), represents superior value versus a portfolio of the largest U.S. banks, namely Bank of America, JPMorgan, Citigroup, and Wells Fargo. As the chart below highlights, the portfolio-weighted price-to-earnings (P/E) ratio for HFMU.U is now at a 2.5x discount to its 5 year average, which is meaningfully larger than the 0.9x discount of the four…

HFMU.U Posts 32% EPS Growth Y/Y; 13% Ahead of U.S. Large-Cap Financials

In Q4 2018, the holdings in the Hamilton Capital U.S. Mid-Cap Financials ETF (USD) (ticker: HFMU.U) recorded year-over-year portfolio-weighted EPS growth of a robust 32%[1], supported by excellent fundamentals including rising margins,  solid volume growth and the reduction in the U.S. corporate tax reduction (which added roughly ~18% to this growth rate). As we explained in our insight “U.S. Bank M&A: Implications from the Largest Deal…

Canadian Banks: Five Takeaways from BBT/STI, Accelerating U.S. Bank M&A

Last week, in our insight “U.S. Bank M&A: Implications of the Largest Deal in a Decade”, we explained why we expect U.S. bank consolidation will accelerate following the BB&T/SunTrust merger, and reasons why such activity will predominately be within the small and mid-cap banks. In this insight, we offer five takeaways for the Canadian banks – BMO, CM, RY, and TD – and their U.S. expansion…

U.S. Bank M&A: Implications from the Largest Deal in a Decade

On Thursday morning, BB&T (BBT) and SunTrust (STI), two of the largest banks in the U.S. Southeast, announced a merger of equals (“MOE”). With an aggregate deal value approaching US$66 billion, the transaction marks the largest bank M&A deal since the 2008 financial crisis and will create the 6th largest bank in the United States. In this update we provide our thoughts including the main takeaways…

U.S. Financials | Analysts vs. the Markets (as Fundamentals/Stock Prices Diverge)

This has been a tough month for the financials, particularly banks. What made this correction unusual is that throughout October, the financials continued to post very high earnings growth, and with minimal downgrades in estimates/target prices, the ingredients for a sharp sell-off were largely absent. Of the 270 financial services stocks covered by the U.S. broker-dealer, Sandler O’Neill + Partners (SOP), over 70% met or beat…

U.S. Financials | Mid-Caps Longer-Term Outperformance in One Chart

Given the media attention given to the U. S. large-cap financials (e.g., JPM, MetLife, AIG), Canadian investors can’t be faulted for sometimes neglecting to diversify into the very large and varied mid-cap financial sector south of the border. That said, in our view, investors should not overlook this important sub-sector given its long-term history of material outperformance relative to its better known large-cap peers, as evidenced…

Notes from Chicago: Opinions on the Canadian Banks (part 1)

We recently met with the top management of four Chicago-headquartered U.S. mid-cap banks (see related October 9, 2018 “Notes from Chicago – Three Takeaways from the Windy City (Part 2)”). Given their large presence in this giant MSA, it was not surprising that the Canadian banks and their speculated U.S. expansion plans were a frequent discussion topic. Chicago is the single most important market to Canadian…

Notes from Chicago: 3 Takeaways from the Windy City (part 2)

We recently met the top management of four U.S. mid-cap banks headquartered in Chicago (see related October 10, 2018 “Notes from Chicago – What the Banks Said About the Canadian Banks/M&A (Part 1)”). Chicago is the third largest U.S. MSAwith real GDP of US$583 billion and a population of 9.6 million. Although large, the Chicago MSA has one of the least favourable demographic profiles among the “large…

HFMU.U: Much Lower Drawdowns than U.S. Large-Cap Financials

In our September 4th, 2018 ETF Manager Comment “HFMU.U Outperforms U.S. Large-Cap Financials in Year #1 Rising 15%, Despite Two Formidable Obstacles” we discussed the performance of the ETF in its first year. However, as a follow up, we thought it would be helpful to address risk and volatility of returns. Using monthly data, the U.S. Large-Cap Financials index declined 5 straight months (February to June)…

HFMU.U Outperforms U.S. Large-Cap Financials in Year #1

Up ~15%, Despite Two Formidable Obstacles Our Hamilton Capital U.S. Mid-Cap Financials ETF (USD) rose 15% in its first year, outperforming the U.S. large-cap financials index (S5FINL Index). The sheer earnings growth of HFMU.U holdings supported this outperformance despite two very formidable obstacles, both of which we believe are unlikely to recur. Of importance, HFMU.U achieved this outperformance with significantly lower drawdowns and volatility. What were these…

HFMU.U Posts 35% EPS Growth Y/Y

900 bps Ahead of U.S. Large-Cap Financials In Q2-2018, the holdings in the Hamilton Capital U.S. Mid-Cap Financials ETF (USD) (HFMU.U) have recorded year-over-year portfolio-weighted EPS growth of a robust 35%, a full 900 bps ahead of the 26% EPS growth reported by the U.S. large-cap financials index. This is the fourth consecutive quarter since its inception that earnings for HFMU.U’s holdings have outpaced the U.S.…

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