Hi all, I’m relatively new to this board but not MF. My sense is this board thinks a lot about process so I’d love to hear the group’s thoughts on the following question which is precipitated by BOFI’s recent news but is more general than BOFI specifically.
I bought BOFI for the first time recently, thinking the issues had calmed down enough. At first I thought, “I’m a genius!” followed quickly by, “Oh crud.” I bought for the long haul based on the past growth of the business. But wouldn’t have bought today given the recent news. Instead I would have waited to see if these new issues appear to blow over.
Like any stock, there are known and unknown risks and sometimes those risks materialize quickly. I am trying to decide if I wouldn’t have bought today, does that mean I should sell and take the loss? The underlying fundamentals have not changed but I characterize the recent news as increasing the risk that the future growth doesn’t materialize. Since I now hold the stock I am finding myself trying to figure out if the current risk level is OK to continue to hold the stock. Does that make me a rabbit?
I am wondering the same thing. I bought shares of BOFI quite some time ago, and saw them rise to $142 per share (pre-stock split) not too long before all the hoopla over the disgruntled former employee started. I held onto my shares, still believing in the company, and was rewarded recently when the stock price rose again. My profit, had I sold,would have been less than many months ago, but I felt good that the bad news seemed to be behind us.
Now, with the newest bad news, my profit has been wiped out completely. If I sell, I will only have a small loss, but I am inclined to wait this out. On the other hand, I am going weary of all the drama with BOFI.
I am curious as to what others on this board are doing, ie- buying more shares, selling, etc.
Those thoughts of “I’m a genius”, followed by “I’m an idiot” happen all the time, not necessarily in that order. That is normal, go ahead and have those feelings. Then ask yourself how is the company doing and what are its prospects.
For me, I bought some of this company in 2014, and the stock has gone up, and it has come down, and there is a lot of noise with short sellers. All the while the company is doing great, expanding the services they provide, growing from a small bank to a bigger one. It looks like they have a lot of room to run. And I let my shares sit.
I made a second purchase of shares a few days ago, about the same price I paid a year and a half ago. The very next day the stock went up 10% and I thought I am a genius. The last two days it has dropped about 10% per day, and I am thinking I am an idiot. All the while the company keeps posting great numbers with a lot of room to run. Until that changes I’ll keep my shares. With all the uncertainty I bought a little less than I might have otherwise.
My American lawyer told me that to conserve your rights you have to defend them vigorously. I’ve seen it play out in the market. Altria defended vigorously because they had the money to do it and MO because a fantastic investment:
Hi Ed,
In this kind of situation I try to distance myself emotionally from the stock as far as possible. I pretend a friend owns it and asked me tor my opinion on it. What would I tell him?
With BOFI I would say it’s too risky. It has crossed the line over to speculative investing. You can find better companies for long term value growth positions.
Well, yes, you are right. The future revenue and / or expenses might change and that is why I said the risk is greater. Here are my thoughts with the caveat that I am not a lawyer.
A class action lawsuit is trying to get damages for past behavior that impacted the share price in a way that hurt the class members financially. So that could lead to damages but should not on its own change the future revenue growth. A one time payment in the future - but I don’t worry about that for the long term.
A class action lawsuit that turns into a whistle-blower matter where the government intervenes in the case and goes after either financial harm incurred by the government or more likely civil penalties for failing to follow some law properly also is based on past behavior. Again it leads to a future payment but a one time payment.
Now - that government action should also lead to a change in future behavior so as to avoid the same bad acts again. The key question then is what would those changes do to the future revenue and operating expense lines? Op Ex might go up if greater compliance efforts are needed. I assume there is risk to the revenue line from reduced lending options or other more draconian changes. I’m not sure how likely that is.
Ed, you might not like my reply but be assured it’s not personal in any way. It’s the reply you might get from an old fart acting like an old fart.
Your post assumes that nothing in the past would change. All the actions you mention are in the future. But there was talk of off balance sheet dealings to hide losses. Should these prove true then anything from a mild revision of the books to Enron like bankruptcy might happen. Since these things are not on the books, us outsiders have no way to determine them. This is not measurable risk, it’s uncertainty pure and simple, a toss of the dice.
I don’t think a prudent investor should gamble this way with his retirement monies. It’s not a question of being right but of having money to pay for your old age.
My sense is this board thinks a lot about process so I’d love to hear the group’s thoughts on
Try this, first, thanks to Bob, figure out which tribe you are in…
Losing Tribes Rabbits – Rabbits tend to cling to their first impressions of a stock and do not like being wrong. When losing money, Rabbits neither buy more nor sell shares. Raiders – Raiders like nothing better than taking a profit as soon as practical. They prefer taking a sure profit than risking a loss by holding on to their shares for an even bigger gain.
Winning Tribes Assassins – Assassins sell stocks that have fallen by a prespecified amount or that have declined by any amount and showed no signs of recovery after a certain period of time. Hunters – Hunters invest a lesser amount at the outset with the intent of acquiring significantly more shares if the stock’s price falls. If their conviction in a stock lessens for a good reason, they sell their shares. Connoisseurs – Connoisseurs make long-term, high conviction investments in companies with very predictable earnings. They take small profits as the stock appreciates, rather than selling entirely out of the position.
Are you a rabbit that never cuts losses?
Next, go look at the charts of the last 10 stocks you sold. Mark where you made your buys and sells. Were they consistently good or bad decisions, or “throw a dart” random decisions. That might help inform this decision.
I think that we have a situation in our financial markets that will require strong government intervention to correct. In the old days we had blatant stock manipulation carried on by professionals in the trading pits. Changes in laws and zealous SEC enforcement changed that somewhat. The robber barons were at least forced to try other techniques than direct manipulation of the trading floor.
We now seem to be beset by a staggering combination of market manipulation activities: computer front-running of trading, dark pools, short-selling cabals, and law firms cranking out “class-action” lawsuits based on little more than extreme market volatility (often created by the earlier-mentioned factors).
Focusing on the short-selling cabals…it seems they employ a wide variety of unsavory methods to prey on companies and their shareholders. They use social media to distort and repeat their mostly unfounded allegations to create fear. uncertainty, and doubt. They prey on smaller cap companies that have mostly retail float and have enjoyed
market success, typically reaching overbought conditions before they begin their market attack. IMO, BOFI is one of the companies targeted by this activity. Thus far, the allegations are unproven, the company has shown exemplary fundamental results. I have some banking experience and do not believe that bad loans can be hidden from a regulator pointed in their direction; yet BOFI’s non-performing assets are such a tiny fraction that the banking industry is envious.
IMO, the recently disclosed “new” lawsuit that Newechota has pointed out, is not new at all, is a symptom of the previous market manipulation. That a Municipal Pension Fund Trust has joined the action does not lend it any particular credence to me. What does the trust have to lose? Is it sharing legal costs? Does it have any costs at all to participate? I am surprised that more small investment trusts are not found to be participating in these “sleazy lawsuits” as the prudent man rule could be interpreted to say that there is something to gain if won or settled and nothing to lose if lost. All it would take for their participation would be an innocent relationship between a trustee and attorney for the firm bringing the action.
I certainly don’t blame anyone for bailing out of BOFI because of the situation that we have (and have had). The stock is clearly only appropriate for investors with a long term horizon. I also recognize that there is a chance that this attack from a short cabal ends even more badly for BOFI investors. I would point out, however, that so far the demonstrated “sleaze” has come from the short cabal and the lawyers pushing these class-action cases. The demonstrated sleaze has not come from BOFI management.
Mike, I’m afraid you misunderstood my post. The question on the floor is “Question re BOFI-type situation.” It’s not about BOFI as such. I gave an opinion. The reply I got I felt didn’t take into account all possible risks, I though it was too bull oriented so I pointed out additional potential hazards that had not been contemplated. Whatever BOFI’s situation is, not looking at the potential hazards is dangerous.
I don’t invest in banks. I don’t trust bankers and I don’t like credit risk. For all these reasons I have no information, opinion, or interest in BOFI. All you say about BOFI might be exactly true, I don’t know. That does not change the fact that before putting money at risk, theses areas should be explored which was my point in addressing the: “Question re BOFI-type situation.”
Sorry if my post offended you. I believe that I did understand your post and tried to point out that the BOFI type situation is rooted in a systemic problem of our financial markets.
As you used BOFI specifics to make your point, My point is that the lawsuit adds a whole new dimension to the investment story, I used BOFI specifics to make mine. There was no intent on my part to counter your post in any manner except to point out that the “lawsuit” results from sleaze activities of a short cabal and executed by sleaze lawyers.
As far as your oft-expressed attitude about bankers, I was a banker but went straight 33 years ago.
Hope you are coping well with the Venezuela malaise!
I certainly don’t blame anyone for bailing out of BOFI because of the situation that we have (and have had). The stock is clearly only appropriate for investors with a long term horizon. I also recognize that there is a chance that this attack from a short cabal ends even more badly for BOFI investors. I would point out, however, that so far the demonstrated “sleaze” has come from the short cabal and the lawyers pushing these class-action cases. The demonstrated sleaze has not come from BOFI management.
Mike,
I couldn’t have said it better myself. I hear a lot of talk about the “sleaze” though I also feel it is more coming from the shorts and possibly the negativity they are causing then management themselves. Maybe it would be good to consider the “sleeze” factor for those who actually are writing the short reports? Management is doing everything they can to legally boost shareholder value. So far nothing factual has been proven and I said back last fall I am going to wait for some facts to come out before I make a decision to sell. We have had several earnings calls and other misc. calls since the short attacks began. So far we have had no ill effects or major declines in company performance. In the last call Mr. Garrabrants even stated he expected things to get worse before they get better. He expected it was possible a few more people may come forward. He also said through all the negativity BOFI will continue to perform and eventually the stock price will reflect the companies performance. Yes there is a lot of negativity here with this name though I feel it is all brought on by complicated and difficult to prove accusations that have yet to be proven true. I guess it is true in today’s society it truly is guilty until proven innocent.
I will not or never will blame anyone for selling out. Honestly it could be life is just too short to deal with such a hassle. I totally understand and would never hold it against anyone. Maybe you believe I am naive and management is complete scum. That is perfectly fine and I completely respect your opinion.
I definitely look forward to see how this whole story ends up playing out. It sure makes life quite exciting.
I’m not offended at all. I just though there was a misunderstanding that should be set straight. I think there still is. It’s about the lawsuit. You say:
As you used BOFI specifics to make your point, “My point is that the lawsuit adds a whole new dimension to the investment story,” I used BOFI specifics to make mine. There was no intent on my part to counter your post in any manner except to point out that the “lawsuit” results from sleaze activities of a short cabal and executed by sleaze lawyers.
The question, for this thread in particular, is whether lawsuits are relevant. Discussing the merits of the lawsuit is not. To illustrate better, “are lawsuits relevant” is a “Question re BOFI-type situation” while discussing the merits of a specific lawsuits is a “BOFI-specific issue.” This is the difference I’m trying to highlight to differentiate a method applicable to similar cases from the evaluation of a specific threat to an investment. Why are lawsuits relevant? Because now there is a new party playing in the game, the judge who may or may not have an ax to grind, who might know more than we do about this kind of legal issue, because BOFI might settle or not settle, because BOFI might or might not put up a good defense. All of these considerations are apart from the actual merits of the case.
What makes this thread different from the other BOFI threads is that the others deal with the specifics of BOFI or the board (Did Saul sell?). This one deals with short attacks in general.
