Year-End Plans, and BOFI

Year-end plans, and BOFI

What I plan to do for year-end, is to review each of my stocks, and talk about what happened with the stock since I bought it. Some will be losers and some winners.

I’ll start this post with BOFI.

I bought BOFI just over two years ago, taking my initial position at $28. It went pretty much straight up and hit $106 about 10 months ago, which was probably getting ahead of itself. It then fell (with a bounce or two) over about seven and a half months, to reach a bottom of about 65, all the time having no bad news at all. I bought more and more on the way down from about $90 to $65. It’s now back up to $78. With all those gyrations it’s almost exactly flat for the past year. I have a loss on what I added above $79, and a gain on what I added below $79. (There’s a bit more that I bought below $79). So on this year, I’m roughly flat. On my original investment at $28, I’ve almost tripled in two years.

Now let’s see what’s happening with the company. I have 12-month trailing earnings dating back every quarter from Sept 2011 to Sept 2014. Here they are:


What can we see from this? Well it’s a steadily increasing list, and a steadily rising upward slope. And even better, the slope is increasing! As the company has gotten bigger, instead of slowing down, the RATE of growth has increased.

Comparing last quarter’s trailing earnings to three years ago, it has more than doubled (from 2.01 to 4.18). Compared to one year ago, it’s up more than 50% (from 3.05 to 4.18). At the current price, the PE is 18.9, which isn’t bad for a company growing earnings at over 50%. I’ve let this company grow to an outlandish 14.5% of my portfolio.

Fletch pointed out the same thing about their Tangible Book Value. Not only is it growing, but the rate of growth is increasing. (I’m sure you’ve all read Fletch’s great write-ups on BOFI on this board, if not on the MF RB board).

Tom Engle (TMF1000), another well thought of member of the MF community, recently wrote a review of last quarter’s results on the RB board. I’m paraphrasing from his conclusions here:

The stock is currently priced at $79.63, which represents a PE ratio of 18.96 and a Price to book value of 2.89. I think they are attractively priced for long-term investors. I own them and plan on keeping them for the extreme long-term, which for me means that these shares will likely be inherited.

I never liked investing in bank stocks. I feel even the strongest of them suffer during recessions, but BOFI has such a strong loan growth with excellent loan discipline that I believe they will do much better than the average bank even during recessions. This one could be my next superstock. I am very happy I invested in it.

Thus, while this is a very high conviction stock for me, which is my largest position and which makes up 14.5% of my portfolio, it has essentially been flat for the past 12 months, while the earnings caught up to the stock price, which had gotten inflated. I have no regrets. It’s currently attractively priced and should continue to do well.


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Compared to one year ago, it’s up more than 50% (from 3.05 to 4.18)…the PE is 18.9, which isn’t bad for a company growing earnings at over 50%

Oops, that should be more than 33%. Glad I caught it before anyone else did.



I am looking forward to reading the reviews.

Here’s an excerpt from a great end of year summary by Fletch. He points out some of the same things I pointed out in my post. The stock went nowhere on the year, but all the news was great!


2014 was an interesting year for Bank of Internet. If you grade the year purely based on how the business did, you’d really have no choice but to give BOFI an A+. Deposit growth was fantastic, loan growth was fantastic, loan quality (according to management’s metrics) remained very strong, spreads held steady, tangible book value growth was amazing, and EPS just kept rising.

If you grade the year based on stock price performance, you’d be hard pressed to give BOFI anything other than a C-. BOFI’s closing price on 12/31/13 was $78.43 per share. The closing price on 12/31/14 was $77.81. In a year in which the S&P 500 returned around 14%, a year of basically flat returns for BOFI is disappointing, to say the least.

And the beginning and ending prices do not tell the full tale. Investors had to ride some pretty wild swings, from a high of $105 in March (from Jan 1 to Mar 14 BOFI was up 35%) to a low of $66 in October (from peak to trough that’s a drop of 37%). Include several short attacks and the delay of the H&R Block transaction and we had ourselves quite a wild ride. And all the while management was executing, executing, executing.

I will steal from my last quarterly update post and present what I think are the most important numbers to focus on:

…This is now the sixth consecutive quarter that management has not only increased book value per share, but increased the rate at which annual per share TBV is growing. For the last six quarters, book value per share has increased year-over-year by 21%, 23%, 27%, 29%, 32%, and now 37%.

Those are awesome results. Objectively speaking, I don’t think we could have asked for better execution than that. As a note of caution though, I don’t think we should expect that level of growth to continue; any sustained growth in TBV over 20% should be considered excellent, in my opinion…

We can’t control stock price. We can, however, control in which companies we invest. If you look at each 2014 metric for BOFI other than stock price, 2014 was a great year. That’s what I’m choosing to focus on. I can only hope 2015 is as good.