A Bridge to the Future, BofI CEO Update

Top Holding

Vertex Value Fund & Vertex Managed Value Portfolio

Earlier this week Greg Garrabrants, President and CEO of BofI (Bank of Internet), released his 2017 letter to shareholders titled “A Bridge to the Future”. As one of the largest holdings across our Value Funds, we thought that we would share some key takeaways from Greg’s letter:

  • Strong Growth: For the second consecutive year, BofI has generated record net income, book value per share, and earnings per share (EPS), with EPS growth of 37% CAGR since 2007
  • Strategic Partnership Expansion: Building on a solid relationship, BoFI will handle all of H&R Block’s refund anticipation loans for 2018 C&I Loan Portfolio at almost $1B: By methodically increasing it’s commercial and industrial lending, BofI has prudently enhanced it’s asset generation capabilities.
  • Best-in-class: ROE of 17.8% and a 36.1% Efficiency Ratio

Our stake in BofI is a great example of Matt Wood’s value investing philosophy. Since 2008, we’ve seen an evolving tendency towards impatient investing strategies, as investors (of all types) have been distracted by circumstantial noise surrounding the markets. In the case of BofI, we saw short-interest skyrocket as inaccurate news stories drove the bank’s share price down. However, we were more interested in the company’s intrinsic value and solid financial performance – and the probability of a short-squeeze only sweetened the deal. Sporting some price-to-value metrics not seen since the credit crisis, BofI is now the largest holding in our two Value Funds.

Both innovative and scalable, we think that BofI has plenty of room to run. Our expectation is that our investment in the firm will increase over the next five years, as our funds continue to provide long-term value for our clients.

Read the full letter.

On May 15th we held a call with Greg Gerrabrants as the first part of our “Listen Live Series”.

Read Notes from that call.

Until next time…

Vertex Value Fund
Fact Sheet

Vertex Managed Value Portfolio
Fact Sheet