Warren Buffett May Invest in Regional Banks
The U.S. has reportedly turned to Warren Buffett once more for help in a financial crisis.
The billionaire investor offered lifelines to Goldman Sachs in 2008 following the collapse of Lehman Brothers, and to Bank of America in 2011.
Now, Buffett has been in contact with the White House amid this year’s regional banking crisis, offering advice and guidance but also discussing an investment in the sector, Bloomberg News reported Sunday (March 19), citing unnamed sources.
Federal officials have sought to reassure the public over the past week after two high-profile banking failures: the collapse of Silicon Valley Bank on March 10, followed by the failure of Signature Bank two days later.
In a speech March 13, President Joe Biden told Americans they “can rest assured our banking system is safe. Your deposits are safe.”
That hasn’t kept politicians from both sides of the aisle for proposing tougher action against the banking sector. In that same speech, Biden called for a “full accounting” of what led to the two bank failures.
Later in the week, the top Republican and Democrat on the House Financial Services Committee said they’d scheduled a hearing for later this month to question top officials from the Federal Reserve and Federal Deposit Insurance Corp.
“The House Financial Services Committee is committed to getting to the bottom of the failures of Silicon Valley Bank and Signature Bank,” Republican Patrick McHenry and Democrat Maxine Waters said in a news release. “This hearing will allow us to begin to understand why and how these banks failed.”
Worries about the industry continued late into the week, with a group of 11 large banks banding together to help another regional bank — First Republic of California — with a $30 billion injection.
“Last weekend felt like the wild, wild West,” Charlie Youakim, CEO of payments startup Sezzle, told PYMNTS CEO Karen Webster soon after the SVB failure. “SVB had been around forever, they had a great brand. [Its collapse] is a big shock to me.
Now, he added, there’s a conversation happening across the ecosystem about the future of banking, as they begin to be more diligent about where they keep their money.
“We’ve got a board meeting later this week to go over the set of banks that [Sezzle] works with,” said Youakim. “We’re putting together a report of what these banks look like, their financial stability … because it’s not the case anymore that you can just trust your bank, trust that your money will be safe.”
Sudburians invited to provide thoughts on city plan to attract investment
Residents are invited to attend one of two virtual open houses to provide feedback on the draft employment lands community improvement plan.
CIPs are a sustainable community planning tool used by municipalities to revitalize areas of a city or community through programs, grants and incentives. Under the Planning Act, CIPs can be undertaken for environmental, social or economic development reasons.
Through its various CIPs, the city has developed a number of financial incentives that are available to any proponent within the CIP area.
The City of Greater Sudbury’s new employment lands CIP will support projects that strengthen and diversify the community’s industrial sectors through increased employment and investment. Eligible projects can receive significant tax increment-based grants to offset the increased taxes driven by higher property values at project completion.
This is the first economic development-driven CIP in the city’s history that is focused on investment attraction and expansion.
The proposed CIP includes a tax increment equivalent grant (TIEG) available to support industrial development. The highlights include:
- Applications are prioritized based on construction value, number of jobs created or retained, location.
- TIEGs range from a three-year, five-year, seven-year or 10-year span.
- The incentive is available for any location within Greater Sudbury.
- Targeted industries include clean tech, life science, and film and television; however, projects from other sectors with potential for economic development and job creation are eligible to apply.
- Applicable projects must have a base construction value of at least $1 million.
The program may be combined with other incentive programs offered by the city or other levels of government.
The first open house takes place on June 13 from 2:30-3:30 p.m. at greatersudbury.ca/employmentcip1. The second public consultation takes place on June 14 from 5-6 p.m. at greatersudbury.ca/employmentcip2.
For more information, including drafts of the proposed CIP, go to overtoyou.greatersudbury.ca.
Is AGNC Investment's Stock a Buy? – The Motley Fool
Times are tough in the mortgage space right now. Rising interest rates led to a collapse in mortgage originations, and mortgage-backed securities have been out of favor among investors for the past 15 months or so. Mortgage real estate investment trusts (mREITs) were beset by declining asset values and have had to cut dividends. These factors explain mREITs’ massive share price underperformance since the Fed started hiking rates last year.
Under these circumstances, is AGNC Investment (AGNC 0.62%) — the best known mortgage REIT — a buy?
Mortgage REITs are different than traditional REITs
Most REITs invest in physical properties like office buildings, malls, or apartment complexes, and then lease out space to tenants. It is an easy-to-understand business model. Mortgage REITs use a different model: Rather than investing in properties, they invest in real estate debt — in other words, mortgages. Instead of collecting rent payments, they collect interest payments. In many ways, they look more like banks or hedge funds than landlords.
AGNC Investment focuses on mortgage-backed securities (MBS) that are guaranteed by the U.S. government, so it has minimal credit risk. If a borrower fails to pay their mortgage, the government ensures that AGNC Investment gets paid on its investment. These securities tend to pay low interest rates because of the government guarantee — low risk equals low returns. This means that mortgage REITs generally must borrow a lot of money to turn a bunch of securities that pay interest rates in the mid-single-digit percentages into dividend yields in the teens.
Mortgage-backed securities are under pressure
Over the past year, mortgage-backed securities have underperformed Treasuries as benchmark interest rates were raised. You can see the effect in the chart below, which looks at the difference between the prevailing mortgage rate and the yield on Treasuries. The higher the line goes, the greater the underperformance (“widening MBS spreads” in trader parlance) and the higher the risk of a dividend cut.
The underperformance of mortgage-backed securities results in the book value per share of mREITs declining, which puts them at risk of needing to cut their dividends. There have been three main drivers of MBS underperformance recently:
- The Fed’s ongoing policy of fiscal tightening.
- The exit of the Fed as a regular buyer of the securities.
- The supply of mortgage-backed securities from banks that saw big regional banks get into trouble because they held MBS that were underwater.
AGNC Investment held onto its portfolio of MBS, so their declines in value will translate into higher returns going forward. On the first-quarter earnings conference call, Chief Executive Officer Peter Frederico said that the expected return on its portfolio was a percentage in the mid-teens, and asserted that the company can support its dividend. That said, AGNC cannot ignore declines in book value per share, so, at some point, it might have to cut the dividend if mortgage-backed security underperformance continues.
The dividend is no sure thing
Investors who look at AGNC Investment now are probably going to be attracted to its dividend, which yields 15.2% (based on its current share price and recent distributions). However, the continuation of payouts at that level is no sure thing. The stock trades at a premium to book value per share. However, with the MBS spread increasing, its book value per share is probably declining. With mortgage REITs, it is important to remember that book value per share is a moving target.
Mortgage-backed securities are the cheapest relative to Treasuries they have been since the mid-1980s. There is no doubt that valuations are attractive. The problem is that the fortunes of AGNC Investment are tied to Federal Reserve policy, and while most strategists believe the central bank is near the end of its rate-hiking period, that is no sure thing either. Investors considering buying AGNC for the dividend should keep all of that in mind.
5 Best Growth Stocks to Invest in Now, According to Analysts – June 2023 – TipRanks
Growth stocks are enjoying huge gains in 2023 so far due to the hype surrounding artificial intelligence and expectations of a slowdown in interest rate hikes. Further, recent economic data reflects slowing inflation and a decrease in the yield on long-term government bonds. Interestingly, this makes for a favorable scenario for growth stocks.
To help investors choose the best growth stocks from the entire universe, TipRanks offers a Stock Screener tool. Using this tool, we have shortlisted five stocks that have received a Strong Buy rating from analysts, and whose price targets reflect an upside potential of more than 20%. Also, they carry an Outperform Smart Score (i.e., 8, 9, or 10) on TipRanks. Lastly, these companies’ revenues have witnessed a strong compound annual growth rate over the past three years.
According to the screener, the following stocks have the potential to grow and are analysts’ favorites.
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